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COVID-19 and Its Effects on Rent Prices for the Hospitality Industry: An Economic Model for the Rebus Sic Stantibus Clause

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  • Juan Pedro Aznar Alarcon

Abstract

The COVID-19 pandemic made hotels around the world to experience a huge drop in revenues as lockdowns restricted mobility. For many hotel operators, the rent of the building is one of the most important fixed costs. The Rebus Sic Stantibus clause allows judges to rule that changes can be made to the economic conditions of contracts when a supervening event, not foreseen by the parties, causes economic hardship. This paper analyses, considering different market structures and the degree of product differentiation, how the rent for hotel facilities agreed in long-term contracts will change if the clause is applied now, reducing by law current rents. JEL Classifications : K12, K22, D43, L83

Suggested Citation

  • Juan Pedro Aznar Alarcon, 2024. "COVID-19 and Its Effects on Rent Prices for the Hospitality Industry: An Economic Model for the Rebus Sic Stantibus Clause," Studies in Microeconomics, , vol. 12(3), pages 308-325, December.
  • Handle: RePEc:sae:miceco:v:12:y:2024:i:3:p:308-325
    DOI: 10.1177/23210222221119372
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    More about this item

    Keywords

    Rebus Sic Stantibus; oligopolistic competition; equilibrium price; product differentiation;
    All these keywords.

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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