Online and offline demand and price elasticities: Evidence from the air travel industry

Information Systems Research

Volumn 23, Issue 1, 2012, Pages 164-181

  Granados, Nelson ^a   Gupta, Alok ^b   Kauffman, Robert J ^c  

^a PEPPERDINE UNIVERSITY   (United States)

^b UNIVERSITY OF MINNESOTA   (United States)

^c ARIZONA STATE UNIVERSITY   (United States)

Author keywords

Air travel industry; Economics of information systems; Electronic markets; Market transparency; Mechanism design; Multichannel strategy; Online travel agencies; Price elasticity; Self selection

Indexed keywords

EID: 84862813348     PISSN: 10477047     EISSN: 15265536     Source Type: Journal    
DOI: 10.1287/isre.1100.0312     Document Type: Article

References (55)

1. Alba, J. W., J. Lynch, B. Weitz, C. Janiszewski, R. Lutz, A. Sawyer, S. Wood. 1997. Interactive home shopping: Consumer, retailer, and manufacturer incentives to participate in electronic marketplaces. J. Marketing 61(3) 38-53.
2. Akerlof, G. A. 1970. The market for lemons: Quality uncertainty and the market mechanism. Quart. J. Econom. 84(3) 488-500.
3. Anderson, N. H. 1968. A simple model for information integration. R. P. Abelson, E. Aronson, W. J. McGuire, T. M. Newcomb, M. J. Rosenberg, P. H. Tannenbaum, eds. Theories of Cognitive Consistency: A Sourcebook. Rand McNally, Chicago, 731-758.
4. Anderson, N. H. 1971. Integration theory and attitude change. Psych. Rev. 78 171-206.
5. Bailey, J. P. 1998. Intermediation and electronic markets: Aggregation and pricing in Internet commerce. Unpublished doctral dissertation, Technology, Management, and Policy, MIT, Cambridge, MA.
6. Bakos, J. Y. 1997. Reducing buyer search costs: Implications for electronic marketplaces. Management Sci. 43(12) 1676-1692.
7. Berry, S., J. Levinsohn, A. Pakes. 1995. Automobile prices in equilibrium. Econometrica 63(4) 841-890.
8. Bhadra, D. 2003. Demand for travel in the United States: Bottom-up econometric estimation and implications for forecasts by origin and destination city pairs. J. Air Transportation 8(2) 19-55.
9. Bijmolt, T. H. A., H. J. van Heerde, R. G. M. Pieters. 2005. New empirical generalizations on the determinants of price elasticity. J. Marketing Res. 42(2) 141-156.
10. Borenstein, S. 1992. The evolution of U.S. airline competition. J. Econom. Perspect. 6(2) 45-73.
11. Breusch, T., A. Pagan. 1979. A simple test for heteroskedasticity and random coefficient variation. Econometrica 47(5) 1287-1294.
12. Brons, M., E. Pels, P. Nijkamp, P. Rietveld. 2002. Price elasticities of demand for passenger air travel: A meta-analysis. J. Air Transport Management 8(1) 165-175.
13. Brown, J. R., A. Goolsbee. 2002. Does the Internet make markets more competitive? Evidence from the insurance industry. J. Political Econom. 110(4) 481-507.
14. Brynjolfsson, E., M. D. Smith. 2000. Frictionless commerce? A comparison of Internet and conventional retailers. Management Sci. 46(4) 563-585.
15. Brynjolfsson, E., Y. Hu, M. D. Smith. 2003. Consumer surplus in the digital economy: Estimating the value of increased customer variety at online booksellers. Management Sci. 49(11) 1580-1596.
16. Chellappa, R. K., R. Kumar. 2005. Examining the role of "free" product-augmenting online services in pricing and customer retention strategies. J. Management Inform. Systems 22(1) 355-377.
17. Chellappa, R. K., R. G. Sin, S. Siddarth. 2010. Price-formats as a source of price dispersion: A study of online and offline prices in the domestic U.S. airline markets. Inform. Systems Res. ePub ahead of print March 1, http://isr.journal.informs.org/cgi/content/abstract/isre.1090.0264v1.
18. Chevalier, J., A. Goolsbee. 2003. Measuring prices and price competition online: Amazon.com and BarnesandNoble.com. Quant. Marketing Econom. 1(2) 203-222.
19. Chircu, A. M., R. J. Kauffman. 2000. Reintermediation strategies in business-to-business electronic commerce. Internat. J. Electronic Commerce 4(4) 7-42.
20. Clemons, E. K., I. Hann, L. M. Hitt. 2002. Price dispersion and differentiation in online travel: An empirical investigation. Management Sci. 48(4) 534-549.
21. comScore, Inc. 2010. Understanding consumers' shopping and buying behavior at supplier and agency travel sites. Industry Report, Reston, VA, June 2006. Accessed April 18, 2010, www.comscorea.com.
22. Degeratu, A., A. Rangaswamy, J. Wu. 2000. Consumer choice behavior in online and traditional supermarkets: The effects of brand name, price, and other search attributes. Internat. J. Res. Marketing 17(1) 55-78.
23. Dimoka, A., P. Pavlou. 2010. Product uncertainty in online markets: Conceptualization, antecedents, and consequences. Working paper, SSRN. ssrn.com/abstract=1557862.
24. Duliba, K. A., R. J. Kauffman, H. C. Lucas. 2001. Appropriating value from computerized reservation systems ownership in the airline industry. Organ. Sci. 12(6) 702-728.
25. Ellison, G. D., S. F. Ellison. 2009. Search, obfuscation, and price elasticities on the Internet. Econometrica 77(2) 427-452.
26. eMarketer. 2005. High flying online travel segment gets down to business. (March 9). Newsletter, New York.
27. Ghose, A., Y. Yao. 2010. Using transaction prices to re-examine price dispersion in electronic markets. Inform. System Res. ePub ahead of print February 1, http://isr.journal.informs.org/cgi/content/abstract/isre.1090.0252v1.
28. Ghose, A., M. D. Smith, R. Telang. 2006. Internet exchanges for used books: An empirical analysis of product cannibalization and welfare impact. Inform. Systems Res. 17(1) 3-19.
29. Gimeno, J. 1999. Reciprocal threats in multimarket rivalry: Staking out "spheres of influence" in the U.S. airline industry. Strategic Management J. 20(2) 101-128.
30. Goldfeld, S., R. Quandt. 1965. Some tests for homoscedasticity. J. Amer. Statist. Association 60(310) 539-547.
31. Granados, N. F., A. Gupta, R. J. Kauffman. 2006. The impact of IT on market information and transparency: A unified theoretical framework. J. Association Inform. Systems 7(3) 148-178.
32. Granados, N. F., A. Gupta, R. J. Kauffman. 2008. Designing online selling mechanisms: Online transparency and prices. Decision Support Systems 45(4) 729-745.
33. Granados, N. F., A. Gupta, R. J. Kauffman. 2010. Information transparency in business-to-consumer markets: Concepts, framework, and research agenda. Inform. Systems Res. 21(2) 207-226.
34. Gupta, A., B. Su, Z. Walter. 2004a. Risk profile and consumer shopping behavior in electronic and traditional channels. Decision Support Systems 38(3) 347-367.
35. Gupta, A., B. Su, Z. Walter. 2004b. An empirical study of consumer switching from traditional to electronic channel: A purchase decision process perspective. Internat. J. Electronic Commerce 8(3) 131-161.
36. Johnson, R. D., I. P. Levin. 1985. More than meets the eye: The effect of missing information on purchase evaluations. J. Consumer Res. 12(3) 169-177.
37. Johnson, E. J., W. W. Moe, P. S. Fader, S. Bellman, G. L. Lohse. 2004. On the depth and dynamics of online search behavior. Management Sci. 50(3) 299-308.
38. Kennedy, P. 1998. A Guide to Econometrics, 4th ed. MIT Press, Cambridge, MA, 205-217.
39. Lal, R., M. Sarvary. 1999. When and how is the Internet likely to decrease price competition? Marketing Sci. 18(4) 485-503.
40. Lee, H. G. 1998. Do electronic marketplaces lower the price of goods? Comm. ACM 41(12) 73-80.
41. Lynch, A., D. Ariely. 2000. Wine online: Search costs affect competition on price, quality, and distribution. Marketing Sci. 19(1) 83-103.
42. Miller, D., M. J. Chen. 1994. Sources and consequences of competitive inertia: A study of the U.S. airline industry. Admin. Sci. Quart. 39(1) 1-23.
43. Oh, W., H. C. Lucas, Jr. 2006. Information technology and pricing decisions: Price adjustments in online computer markets. MIS Quart. 30(3) 755-775.
44. Oum, T. H., A. Zhang, Y. Zhang. 1993. Inter-firm rivalry and firmspecific price elasticities in deregulated airline markets. Internat. J. Transport Econom. Policy 27(2) 171-192.
45. PhoCusWright. 2004. Number of U.S. online travel buyers up 17% in 2003. Press release, Sherman, CT (March 2). Accessed April 18, 2010, www.phocuswright.com.
46. Regan, K. 2001. Study: Economic slowdown aids online travel. E-Commerce Times (April 23). Accessed April 18, 2010, www.ecommercetimes.com/perl/story/9156.html.
47. Smith, M. D. 2002. The impact of shopbots on electronic markets. Marketing Sci. 30(4) 446-454.
48. Smith, M. D., J. Bailey, E. Brynjolfsson. 2001. Understanding digital markets: Review and assessment. Working Paper 4211-01, Sloan School of Management, MIT, Cambridge, MA.
49. Stigler, G. 1961. The economics of information. J. Political Econom. 69(3) 213-225.
50. Stigler, G. 1964. A theory of oligopoly. J. Political Econom. 72(1) 213-225.
51. Talluri, K. T., G. J. van Ryzin. 2004. The Theory and Practice of Revenue Management. Springer Science and Business Media, New York.
52. Villas-Boas, J. M., R. S. Winer. 1999. Endogeneity in brand choice models. Management Sci. 45(10) 1324-1338.
53. Walter, Z., A. Gupta, B. Su. 2006. The sources of on-line price dispersion across product types: An integrative view of on-line search costs and price premiums. Internat. J. Electronic Commerce 11(1) 37-62.
54. Zettelmeyer, F. 2000. Expanding to the Internet: Pricing and communications strategies when firms compete on multiple channels. J. Marketing Res. 37(3) 292-308.
55. Zettelmeyer, F., F. Scott Morton, J. Silva-Risso. 2006. How the Internet lowers prices: Evidence from matched survey and automobile transaction data. J. Marketing Res. 43(2) 168-181.