DP9463 Opaque Selling: Static or Inter-Temporal Price Discrimination?

Author(s): Pascal Courty, Wenyu Liu
Publication Date: May 2013
Keyword(s): inter-temporal price discrimination, opacity, Opaque selling, product differentiation
JEL(s): L0, L15, L83
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9463

We study opaque selling in the hotel industry using data from Hotwire.com. An opaque room discloses only the star level and general location of the hotel at the time of booking. The exact identity of the hotel is disclosed after the booking is completed. Opaque rooms sell at a discount of 40 percent relative to regular rooms. The discount increases when hotels are more differentiated. This finding is consistent with static models of price discrimination. No support was found for predictions specific to inter-temporal models of opaque selling.