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Buyer Subsidies in Two-Sided Markets: Evidence from Online Travel Agents

Volodymyr Bilotkach and Nicholas Rupp ()

A chapter in The Economics of International Airline Transport, 2014, vol. 4, pp 339-374 from Emerald Publishing Ltd

Abstract: Abstract Platforms in two-sided markets are known to provide subsidies to either buyers or sellers, in order to take advantage of cross-group externalities inherent in such industries. Online travel agents can be thought of as platforms facilitating trade between passengers and travel service providers (airlines). This chapter evaluates the effects of a buyer subsidy provided by one major US online travel agent – a low-price guarantee offered by Orbitz. We find evidence consistent with increased airline participation with this travel agent upon implementation of the low-price guarantee policy. Our results also confirm the theoretical claims that most-favored customer low-price guarantee policies are procompetitive.

Keywords: Two-sided markets; price matching; price guarantees; most-favored customer; meet or release; D4; L4; L93 (search for similar items in EconPapers)
Date: 2014
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