Working Paper: CEPR ID: DP5038
Authors: Sofronis Clerides; Paris Nearchou; Panos Pashardes
Abstract: We study the intermediary role of tour operators in the market for package tourism. Intermediaries often arise in order to facilitate trade in markets characterized by asymmetric information. In the travel industry policy-makers have tried to address information asymmetries by providing hotel ratings. We argue that those ratings are not accurate indicators of quality. Ratings provided by tour operators are more informative and allow for international comparisons. Intermediation by tour operators provides a better matching of quality with price and therefore leads to a more efficient market outcome. There is, nonetheless, scope for government intervention to improve information provision.
Keywords: asymmetric information; intermediaries; middlemen; tour operators; tourism industry
JEL Codes: L15; L83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tour operators' ratings (Z30) | Better alignment of quality with price (L15) |
| Government ratings (R50) | Less accurate quality assessments (L15) |
| Tour operators' ratings (Z30) | Improved market pricing mechanisms (D47) |