The effect of advertising on market share instability in the hotel industry

Although the theoretical literature on the effect of advertising is well developed, few empirical studies quantify the importance of advertising on the market share instability of hotels. This article investigates the influence of advertising on market share instability using Taiwanese international tourist hotel operation data. Telser argues that advertising reduces a leading firm's market share instability by creating market power and entry barriers. This study provides empirical evidence for the theoretical inverse relationship between advertising intensity and market share instability among leading firms in the hotel industry. It identifies advertising as an important factor influencing the market share instability of hotels. Moreover, advertising tends to increase the market share instability of leading firms for different quantiles of the market share instability. The results lend moderate support to the validity of the hypothesis in the Telser model.