This article investigates the impacts of Airbnb on hotel demand and the price and nonprice response strategies of incumbent hotels to Airbnb. We constructed a unique dataset of tourist hotels and Airbnb listings before and after the entry of Airbnb in Taiwan. We found that the entry of Airbnb makes the hotel industry more heterogeneous. Low quality hotels compete on price with Airbnb after Airbnb's entry. In contrast, prices and the investment in service quality increase for high quality hotels. These findings suggest that high quality hotels reposition themselves in the higher end of the lodging market as a response strategy to the entry of Airbnb. Managerial Summary: Incumbent hotels can use a number of strategies to respond to Airbnb's entry. Using a unique dataset of Taiwanese data from before and after Airbnb's entry, we found that hotels' responses differ across the value chain. Low quality hotels compete on price with Airbnb after Airbnb's entry. In contrast, prices and the investment in service quality increase for high quality hotels. The increase of investment in service quality allows high quality hotels to reposition themselves in the higher end of the lodging market.
Haynes made valuable contributions to an earlier draft. 1 HERBERT HOVENKAMP, THE ANTITRUST ENTERPRISE 115-16 (2005). 2 ANDREW I. GAVIL, WILLIAM E. KOVACIC, & JONATHAN B. BAKER, ANTITRUST LAW IN PERSPECTIVE: CASES, CONCEPTS AND PROBLEMS IN COMPETITION POLICY 358 (2002) (noting that after the Sylvania decision "the Court systematically went about the task of dismantling many of the per se rules it had created in the prior fifty years, and increasingly turned to modern economic theory to inform its interpretation and application of the Sherman Act"). As a corollary, the move to a rule of reason analysis has resulted in higher litigation costs because of the complexities involved in the use of that standard.
The international expansion of law firms plays a critical role in understanding the business of law and the nature of globalization. This article responds to the articles by
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