Online Decision-Aids and Pricing: An Empirical Analysis of the Airline Industry

A large body of Information Systems research has shown that decision aids can have prominent effects on decision processes. In this respect, there is compelling support for the cost-benefit model, suggesting that cognitive effort can substantially affect decision strategy and outcome. In this paper we examine the implications of the model in the context of the travel industry. In line with the cost-benefit model, when a decision aid facilitates a strategy promoting the choice of lowprice airline tickets, the probability that those tickets would be identified and, thus, purchased increases. This, in turn, should increase demand for the low-priced tickets and balance overall demand across flights. Therefore, we hypothesize that as the decision aid provided by a carrier requires less cognitive effort, variations in prices decrease and average prices increase. We empirically test our hypotheses by analyzing prices offered by US legacy carriers over 54 routes. The results broadly support our hypotheses.

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