Optimal Information-Sharing Behaviors among Hotels: Game-Theoretical Approach

The lodging industry uses diverse pricing strategies to maximize revenues. Given the uncertain nature of decision parameters (demand conditions), sharing information among competitors can dramatically affect hotels' profits. This study examines the decisions of hotels to share or not to share private information with competitors to maximize profits via a game-theoretic model. In a two-stage model, hotels decide whether to share information in the first stage, and then, in the second stage, they compete in setting prices along the lines of a standard price competition model. Results include that hotels share demand information with their competitors if there is a low demand signal but conceal information if the demand signal is high. This study provides a standard price competition model that can assist hotel managers in decision making on revenue management, including room pricing strategy.

Automated summary

The lodging industry employs a variety of pricing strategies to maximize revenues. Information sharing among competitors can significantly impact hotels' profits due to the uncertain nature of decision parameters. This study explores how hotels decide whether to share private information with competitors in order to maximize profits using a game-theoretic model. Hotels are found to share demand information if there is a low demand signal, but conceal information if the demand signal is high. This research provides a standard price competition model that can aid hotel managers in revenue management decision-making, including room pricing strategy.