Competition and Contestability in the UK Package Tour Industry: Some Econometric Observations

Abstract

This paper explores competition and contestability in the UK package tour industry. Using econometric analysis of a panel-data set evidence is presented that rules out the market power/efficiency hypothesis. In keeping with Evans and Stabler (1995), there is evidence that the industry is segmented according to the size of the firms. In contrast with Gratton and Richards (1997), the results suggest that it is difficult to support the contestability hypothesis in the industry overall. Future research needs to offer less generalized conclusions in characterizing the industry.