Comparison of Fare Quotes across On-Line Travel Agents
Marija Pejcinovska
Mentor: Volodymyr Bilotkach
This study compares fares offered by the three major online travel agents—Expedia, Travelocity and Orbitz—to understand the role of ticket distribution agents in air travel industry price formation. We collected data on the top 100 US airport-pair markets over a period of four weeks and found that, of the three, Orbitz is the least likely to offer the lowest fare. In fact, it offers the lowest fare in only about 8.5% of the cases, even though the lowest fare quotes on Orbitz are often close to those found on Expedia or Travelocity. Preliminary data analysis also suggests that Expedia is most likely to offer the lowest fare, with Travelocity following closely behind. We also observed that, controlling for various market characteristics, both the lowest fare quote and the difference between the first and second lowest fare decreases whenever more than one search engine offers either of the fares. Our results suggest that the ticket distribution market structure is of non-trivial importance for understanding pricing in the passenger air travel industry.