The impact of the Internet on airline fares: The ‘Internet Price Effect’

Customers who use Internet-based online travel agencies to purchase ‘Clearly Leisure’ trips pay less for similar itineraries in the same markets than those who book through traditional agencies, even when the fares offered by the airline through each channel are identical. This study examines this Internet Price Effect (IPE). The study is operationalized as a multivariate regression using passenger-level data, examining the Fare Paid as a function of distribution channel. The study controls for trip, customer and flight characteristics. The IPE persists at a –3 to 8 per cent level across a wide range of timeframes and market sizes.