European Tour Operators' Market Power When Renting Hotel Rooms in Northern Norway

Abstract

Market power studies tend to concentrate on seller power, but in several value chains buyer power is an equally important topic. An example is large tour operators' dealings with a fragmented accommodation industry at a tourist destination. The authors present a framework for testing for the degree of oligopsony power exerted by tour operators, where exchange rates play an important role in identifying the model. The empirical framework was applied to demand for hotel accommodation in Northern Norway. The results indicate that European tour operators have oligopsony power in relation to the regional hotel industry, with a markdown of over 24%.