Platform Price Parity Clauses and Segmentation

UB Economics Working Papers E19/387

40 Pages Posted: 14 Feb 2019

See all articles by Joan Calzada

Joan Calzada

University of Barcelona - Department of Political Economics

Ester Manna

University of Barcelona

Andrea Mantovani

University of Toulouse - Toulouse Business School

Date Written: January 21, 2019

Abstract

We investigate how the adoption of price parity clauses (PPCs) by established platforms affects the listing decisions of suppliers. PPCs have been widely adopted by online travel agencies (OTAs) to force client hotels not to charge lower prices in alternative sales channels. We find that OTAs adopt PPCs when they are perceived as highly substitutable, and in order to prevent showrooming. PPCs allow OTAs to charge hotels higher commission fees. However, hotels can respond by delisting themselves from some OTAs. Hence, our analysis reveals that the removal of PPCs enables more hotels to resort to OTAs. This is beneficial for consumers, as prices decrease in absence of PPCs.

Keywords: Price parity clauses, Online travel agencies, Segmentation, Vertical relations

JEL Classification: D40, L42, L81

Suggested Citation

Calzada, Joan and Manna, Ester and Mantovani, Andrea, Platform Price Parity Clauses and Segmentation (January 21, 2019). UB Economics Working Papers E19/387, Available at SSRN: https://ssrn.com/abstract=3329157 or http://dx.doi.org/10.2139/ssrn.3329157

Joan Calzada (Contact Author)

University of Barcelona - Department of Political Economics ( email )

Av. Diagonal, 696
Barcelona, 08034
Spain
+34 93 402 1933 (Phone)
+34 93 402 4573 (Fax)

Ester Manna

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

Andrea Mantovani

University of Toulouse - Toulouse Business School ( email )

20, bd Lascrosses
BP 7010
Toulouse, 31068
France

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