Seminar den 24. juni 2013

Opaque Pricing. Evidence from the Hotel Industry

Abstract

The emergence of opaque selling (i.e. when some product characteristics are only revealed to the customer after payment) has motivated a growing theoretical literature and industry debate regarding its strategic implications. Little progress however has been done to empirically characterize opaque selling. In this paper we use a unique dataset from the lodging industry and establish the main stylized facts of this mechanism. The data includes matched transactions from opaque and semi--opaque platforms to their exact counterpart booking in the transparent market. Our results suggest that the opaque selling channel constitutes the main device used by hotels to segment demand and even replaced traditional segmentation strategies. On average, consumers obtain a 49 percent discount when booking through a fully opaque platform. This discount drops to 40 percent when the booking is done through a semi--opaque platform. As suggested by the theory, discounts are proportionally larger for high quality hotels. We find little evidence of price discrimination within a platform and no evidence of opaque selling being used as a last--minute resource to dispose unsold inventory by hotels.

Contacts:

Battista Severgnini, lektor, bs.eco@cbs.dk
Cedric Schneider, lektor, csc.eco@cbs.dk

Sted: Økonomisk Institut, Porcelænshaven 16A, 2.80