Price Dispersion and Differentiation in Online Travel: An Empirical Investigation

  • Clemons E
  • Hann I
  • Hitt L
  • 142

    Readers

    Mendeley users who have this article in their library.
  • 249

    Citations

    Citations of this article.

Abstract

Previous research has examined whether price dispersion exists in theoretically highly efficient Internet markets. However, much of the previous work has been focused on industries with low cost and undifferentiated products. In this paper, we examine the presence of price dispersion and product differentiation using data on the airline ticket offerings of online travel agents (OTAs). We find that different OTAs offer tickets with substantially different prices and characteristics when given the same customer request. Some of this variation appears to be due to product differentiation—different OTAs specialize by systematically offering different trade-offs between ticket price and ticket quality (minimizing the number of connections, matching requested departure and return time). However, even after accounting for differences in ticket quality, ticket prices vary by as much as 18% across OTAs. In addition, OTAs return tickets that are strictly inferior to the ticket offered by another OTA for the same request between 2.2% and 28% of the time. Overall, this suggests the presence of both price dispersion and product differentiation in the online travel market.

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Authors

  • Eric K. Clemons

  • Il-Horn Hann

  • Lorin M. Hitt

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free