Making Friends with Your Neighbors? Agglomeration and Tacit Collusion in The Lodging Industry

Li Gan () and Manuel Hernandez

The Review of Economics and Statistics, 2013, vol. 95, issue 3, 1002-1017

Abstract: Agglomeration is a location pattern frequently observed in service industries such as hotels. This paper empirically examines whether agglomeration facilitates tacit collusion in the lodging industry using a quarterly data set of hotels in Texas. We jointly model a price and occupancy rate equation under a switching regression model to identify a collusive and noncollusive regime. The estimation results indicate that clustered hotels have a higher probability of being in the potential collusive regime than isolated properties in the same town. The identification of a collusive regime is also consistent with other factors considered to affect the sustainability of tacit collusion. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: collusion; agglomeration; lodging industry; switching regression model (search for similar items in EconPapers)
JEL-codes: C3 L13 L4 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (23)

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Working Paper: Making friends with your neighbors? Agglomeration and tacit collusion in the lodging industry (2011)
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