Airfares with codeshares: (why) are consumers willing to pay more for products of foreign firms with a domestic partner?

Gerben de Jong (), Christiaan Behrens, Hester van Herk and Erik (E.T.) Verhoef
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Gerben de Jong: VU Amsterdam, SEO Amsterdam Economics
Christiaan Behrens: VU Amsterdam, SEO Amsterdam Economics
Hester van Herk: VU Amsterdam
Erik (E.T.) Verhoef: VU Amsterdam

No 18-077/VIII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Economic globalization has spurred the growth of international cooperation between companies. This paper analyzes partnerships between foreign and domestic firms as a source of signaling advantages. When partnerships affect the products offered, it is not possible to isolate this signaling impact. Virtual codesharing is an important type of marketing partnership in aviation that does not change the product and hence provides the opportunity to identify the direct impact of partnerships on consumer valuation of the partnered products. Roughly 75 per cent of the flights in trans-Atlantic and Pacific markets involves codesharing. Typically, the consumer buys the ticket with the domestic airline, while a foreign airline operates the flight. Analyzing individual-level choice data from a representative panel of Australian air travelers, we find that the average consumer is willing to a pay a premium between 4 and 5.5% of the ticket price when a flight by a foreign carrier is codeshared with the national carrier Qantas. When flying to a less familiar destination, risk averse consumers are willing to pay a premium about two times higher than non-risk averse consumers, suggesting that partnerships have a strong impact on consumer valuation through quality signaling.

Keywords: airline codesharing; marketing partnerships; consumer choice behavior; quality signaling; aviation industry (search for similar items in EconPapers)
JEL-codes: L15 L93 M31 (search for similar items in EconPapers)
Date: 2018-10-22, Revised 2021-02-28
New Economics Papers: this item is included in nep-ind and nep-tre
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