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Price-Parity Clauses for Hotel Room Booking: Empirical Evidence from Regulatory Change

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  • Sean Ennis
  • Marc Ivaldi
  • Vicente Lagos

Abstract

This paper examines the impact of most-favored-nation (MFN) clauses on retail prices, taking advantage of two natural experiments that changed vertical contracting between hotels and major digital platforms. First, a broad EU intervention narrowed the breadth of obligations under price-parity clauses between hotels and major online travel agencies (OTAs). Second, France and Germany went further and eliminated all price-parity agreements for top OTAs. Using transaction data from hotel chains, we find that direct sales by hotels to customers became relatively cheaper than OTA sales for midlevel and luxury hotels. Comparisons with hotel pricing outside the European Union confirm the relative reduction in prices for midlevel and luxury hotels and an opposite pattern for budget hotels. Overall, regulating MFN clauses resulted in significantly cheaper direct-channel sales in two of three hotel types. Primary effects come from the narrow price-parity intervention and not from complete elimination of MFN clauses.

Suggested Citation

  • Sean Ennis & Marc Ivaldi & Vicente Lagos, 2023. "Price-Parity Clauses for Hotel Room Booking: Empirical Evidence from Regulatory Change," Journal of Law and Economics, University of Chicago Press, vol. 66(2), pages 309-331.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/723456
    DOI: 10.1086/723456
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    1. Hunold, Matthias & Kesler, Reinhold & Laitenberger, Ulrich & Schlütter, Frank, 2018. "Evaluation of best price clauses in online hotel bookings," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 542-571.
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    Cited by:

    1. Carlotta Mariotto & Marianne Verdier, 2020. "Platform–merchant competition for sales services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(4), pages 834-853, October.
    2. Mantovani, Andrea & Reggiani, Carlo & Broocks, Annette & Duch-Brown, Nestor & Ma, Peiyao, 2022. "The Price Effects of Banning Price Parity Clauses in the EU: Evidence from International Hotel Groups," TSE Working Papers 22-1371, Toulouse School of Economics (TSE).
    3. Sarah Legner, 2022. "Distribution Agreements In The Digital Economy – A Competition Law’S Perspective," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 16(1), pages 61-69.
    4. Jack (Peiyao) Ma & Andrea Mantovani & Carlo Reggiani & Annette Broocks & Néstor Duch-Brown, 2024. "The Price Effects of Prohibiting Price Parity Clauses: Evidence from International Hotel Groups," Economics Series Working Papers 1043, University of Oxford, Department of Economics.
    5. David Ronayne & Greg Taylor, 2022. "Competing Sales Channels with Captive Consumers," The Economic Journal, Royal Economic Society, vol. 132(642), pages 741-766.
    6. Mantovani, Andrea & Piga, Claudio A. & Reggiani, Carlo, 2021. "Online platform price parity clauses: Evidence from the EU Booking.com case," European Economic Review, Elsevier, vol. 131(C).

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    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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