Using Game Theory and Price Elasticity in Tourism in the U.S.

Abstract

This research aims to employ game theory along with price and income elasticities of demand to reveal hidden strategies for maximizing revenue among competitors in the hotel market, focusing on New York and San Francisco over 20 years. Results suggest that demand for hotels in New York is characterized by luxury-driven income but responsive pricing, while San Francisco exhibits lower income levels but demonstrates Giffen elasticity. Both markets present opportunities for maximizing revenue per available room through a mutually beneficial strategy whereby average daily rates increase in New York and decrease in San Francisco.