With Thomas N. Hubbard.
Published in Journal of Industrial Economics, 71(2), 2023: 491-537. https://doi.org/10.1111/joie.12330
Previously distributed as NBER Working Paper, No. 26579.
Abstract: This paper examines how quality competition affects the relationship between market size and industry structure at the product level using evidence from the U.S. hotel industry. We document that starting in the early 1980s, quality competition for business travelers became more based on variable costs and less on fixed costs, and therefore became less scale intensive at the hotel level. We show that industry structure evolved differently since then in business and personal travel destinations. Market size increases have been met by more, but smaller, hotels in business travel destinations but continued to be met by larger hotels in personal travel destinations. Our results illustrate how the way consumers benefit from increases in market size depends on how firms compete.
The most recent version of the working paper is available as a pdf. (58 pages, 938 KB)