Consumer search in electronic markets: an experimental analysis of travel services

Electronic markets are frequently touted to be highly efficient. The prevailing hypothesis is that very low information search costs will enable buyers to expand their product information search and comparison beyond what is feasible in conventional markets. The aim of this paper is to evaluate the relative efficiency of the product search in current travel service markets. We report the results of our analysis based on an experimental setting with 92 subjects. Our conclusions tend to disagree with previous predictions about the efficiency of electronic markets. The electronic markets observed were found to be at best as efficient as their conventional counterparts. Our results suggest that poor availability of product information and a lack of systems integration severely limit the efficiency of consumer search in present electronic markets.