The Effect of the Internet on Performance and Quality: Evidence from the Airline Industry

Itai Ater () and Eugene Orlov ()
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Itai Ater: Tel Aviv University
Eugene Orlov: Compass Lexecon

The Review of Economics and Statistics, 2015, vol. 97, issue 1, 180-194

Abstract: We argue that the rise of online travel agencies changed the nature of competition in the airline industry—from competition on elapsed scheduled flight times to price competition. Using flight-level data between 1997 and 2007 and geographical Internet growth patterns, we find a positive relationship between Internet access and flight times. The magnitude of this relationship is larger in competitive markets without low-cost carriers and for flights with shortest scheduled times. We also find that flight delays increased as more passengers gained Internet access. These findings suggest that the Internet may adversely affect firms’ performance and incentives to provide high-quality products. © 2015 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Keywords: online travel agencies; airline industry; price competition; flight delays; internet; internet access (search for similar items in EconPapers)
JEL-codes: O30 R41 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (14)

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