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Internet Penetration and Capacity Utilization in the US Airline Industry †

Internet Penetration and Capacity Utilization in the US Airline Industry † Abstract Airline capacity utilization increased dramatically between 1993 and 2007, after staying fairly level following deregulation in 1978. We argue that consumers' use of the Internet to investigate and purchase airline tickets reduces market frictions and allows airlines to meet demand with less capacity and higher load factors. We find that differences in the rate of change of metropolitan-area Internet penetration are positively correlated with differences in the rate of change of airlines' airport-pair load factors. Consistent with our explanation, this correlation is greater on flights in more competitive markets and on flights with fewer total passengers. (JEL L11, L86, L93, M15 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Internet Penetration and Capacity Utilization in the US Airline Industry †

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Publisher
American Economic Association
Copyright
Copyright © 2014 by the American Economic Association
Subject
Articles
ISSN
1945-7685
eISSN
1945-7685
DOI
10.1257/mic.6.4.106
Publisher site
See Article on Publisher Site

Abstract

Abstract Airline capacity utilization increased dramatically between 1993 and 2007, after staying fairly level following deregulation in 1978. We argue that consumers' use of the Internet to investigate and purchase airline tickets reduces market frictions and allows airlines to meet demand with less capacity and higher load factors. We find that differences in the rate of change of metropolitan-area Internet penetration are positively correlated with differences in the rate of change of airlines' airport-pair load factors. Consistent with our explanation, this correlation is greater on flights in more competitive markets and on flights with fewer total passengers. (JEL L11, L86, L93, M15 )

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Nov 1, 2014

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