LAND USE REGULATION AS A BARRIER TO ENTRY: EVIDENCE FROM THE TEXAS LODGING INDUSTRY

Authors

  • Junichi Suzuki

    1. University of Toronto, Canada
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    • 1This manuscript is based on the second chapter of my 2009 University of Minnesota Ph.D. dissertation. I am grateful to my advisors, Pat Bajari and Tom Holmes, for their patience and advice. I also wish to thank Victor Aguirregabiria, Martin Burda, Gilles Duranton, Kyoo Il Kim, Rob McMillan, Ichiro Obara, Minjung Park, Amil Petrin, and Bob Town for helpful discussions and Yoshifumi Konishi, Julia Thornton Snider, and Michael Walrath for giving me detailed comments. This work was made possible by the facilities of the Shared Hierarchical Academic Research Computing Network (SHARCNET: http://www.sharcnet.ca). I would like to acknowledge the Connaught Fund for supporting this research. All remaining errors are my own. Please address correspondence to: Junichi Suzuki, Department of Economics, University of Toronto, 150 George St., Toronto, ON M5S 3G7, Canada. Phone: +1 416 978 4417. E-mail: j.suzuki@utoronto.ca.


  • Manuscript received February 2011; revised May 2012.

Abstract

This article examines the anticompetitive effects of land use regulation using microdata on midscale chain hotels in Texas. I construct a dynamic entry–exit model that endogenizes hotel chains’ reactions to land use regulation. My estimates indicate that imposing stringent regulation increases costs considerably. Hotel chains nonetheless enter highly regulated markets even if entry probabilities are lower, anticipating fewer rivals and hence greater market power. Consumers incur the costs of regulation indirectly in the form of higher prices.

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