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Land Use Regulation as a Barrier to Entry: Evidence from the Texas Lodging Industry

By Junichi Suzuki

Abstract

This paper examines the anticompetitive effects of land use regulation using microdata on mid-scale chain hotels in Texas. I construct a dynamic entry-exit model that endogenizes hotel chains' reactions to land use regulation. Estimation results 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 high prices.Land use regulation; firms\' entry; lodging industry;

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