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Can Economics Explain Where All-Inclusive Deals are Offered?

Author

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  • Christian Bladh
  • HÃ¥kan J. Holm

Abstract

This paper investigates why all-inclusive travel packages are offered at some hotels but not at others. Using the theory of transaction cost, it is argued that all-inclusive contracts mitigate a hold-up problem and that the severity of this problem varies with regard to the hotel's distance from the resort centre. This hypothesis is tested empirically against data from 3,798 hotel offers and is strongly supported. Additionally, some country-specific mechanisms related to the general price level and the degree of corruption are analysed. Countries with all-inclusive offers are characterized by a low price level and high corruption.

Suggested Citation

  • Christian Bladh & HÃ¥kan J. Holm, 2013. "Can Economics Explain Where All-Inclusive Deals are Offered?," Tourism Economics, , vol. 19(2), pages 339-348, April.
    • Handle: RePEc:sae:toueco:v:19:y:2013:i:2:p:339-348
    DOI: 10.5367/te.2013.0209
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    References listed on IDEAS

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    1. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    2. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-185, March.
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    Cited by:

    1. Melville Saayman & Andrea Saayman, 2015. "Understanding Tipping Behaviour — An Economic Perspective," Tourism Economics, , vol. 21(2), pages 247-265, April.
    2. Frédéric Gannon & Frédéric Sandron, 2014. "La différenciation des produits touristiques : le whale watching dans le sud-ouest de l'océan Indien," Post-Print halshs-02477085, HAL.

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    More about this item

    Keywords

    all-inclusive contracts; hold-up problem; transaction cost; travel packages; hotel strategies;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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