The Internet has brought about significant changes in the availability of market information in many industries. E-commerce technologies provide sellers with opportunities to design electronic mercantile mechanisms that reveal, conceal, bias, and distort market information, depending on their goals and market position (e.g., suppliers versus intermediaries). In particular, in information-intensive industries where electronic markets play an important role, many firms are using advanced technologies to put innovative strategies into play that are based on the provision of differential information to their customers. We examine the role of information transparency in electronic markets. We contend that there is an opportunity to develop research on sellers' strategies regarding information disclosure to customers and competitors. For that purpose, we develop a set of concepts and a framework to guide future research. We then propose an interdisciplinary agenda for research on the emerging and increasingly important topic of transparency strategy, which we define as the set of policies and decisions that a firm makes to disclose, conceal, bias, or distort market information.

Consumers often consider delaying a purchase strategically, anticipating that prices might decrease. Combining two unique data sources from the air-travel industry (posted fare data and booking data), we use a structural model to estimate the fraction of strategic consumers in the population, assuming different levels of sophistication in consumers' perception of future prices: perfect foresight and weak-and strong-form rational expectations. We find that 5.2% to 19.2% of the population is strategic across markets, measured by the first and third quartiles. Our intermarket analysis indicates that shorter trips with more attractive outside options are populated with more strategic consumers. Using a nonparametric approach, we further find that most strategic consumers arrive either at the beginning of the booking horizon or close to departure. Finally, our counterfactual analysis shows that, contrary to conventional wisdom, the presence of strategic consumers does not necessarily hurt revenues. Rather, the impact varies by market. Commitment to a nondecreasing pricing strategy is more likely to benefit business markets than leisure markets, or it could even hurt leisure markets. Intermarket analysis shows that city pairs with lower Internet penetration, higher average price, and shorter distances tend to benefit more from such commitment as well.

T he Internet has brought consumers increased access to information to make purchase decisions. One of the expected consequences is an increase in the price elasticity of demand, or the percent change in demand caused by a percent change in price, because consumers are better able to compare offerings from multiple suppliers. In this paper, we analyze the impact of the Internet on demand, by comparing the demand functions in the Internet and traditional air travel channels. We use a data set that contains information for millions of records of airline ticket sales in both online and offline channels. The results suggest that consumer demand in the Internet channel is more price elastic for both transparent and opaque online travel agencies (OTAs), in part, because of more leisure travelers self-selecting the online channel, relative to business travelers. Yet, after controlling for this channel self-selection effect, we still find differences in price elasticity across channels. We find that the opaque OTAs are more price elastic than the transparent OTAs, which suggests that product information can mitigate the price pressures that arise from Internet-enabled price comparisons. We discuss the broader implications for multichannel pricing strategy and for the transparency-based design of online selling mechanisms.

With the advent of the Internet, we have seen existing markets transform and new ones emerge. In this paper, we contribute to the understanding of this phenomenon by developing a unified theory about the role that IT plays in affecting market information, transparency and market structure. In particular, we introduce a new theoretical framework which uncovers the process and the forces that, together with IT, facilitate or inhibit the emerging dominance of transparent electronic markets. Transparent electronic markets offer unbiased, complete, and accurate market information. Our effort to develop a unified theoretical framework begins with a thorough assessment of the prior literature. It also uses an inductive approach involving the case study method, in which we contrast and compare the forces that have led the air travel and financial securities markets to become increasingly transparent. Building on the electronic markets and electronic hierarchies research of Malone, Yates and Benjamin [1987], our findings suggest that IT alone does not explain a move to transparent electronic markets. Instead, we argue that enhanced electronic representation of products, and competitive and institutional forces have also played an important role in the process by which most sellers have come to favor transparent markets.

Case series, Level-IV.

No abstract

No abstract

Abstract. IT advances often create turmoil and disturb existing industry structures. In the travel industry, electronic distribution has existed for decades via the global distribution systems (GDSs), reservation systems that were introduced in the early 1980s on mainframe platforms. Yet with the Internet, new digital intermediaries have threatened the viability of these legacy GDSs. We examine this transformation of etravel distribution to test the theory of newly vulnerable markets. It predicts how markets become vulnerable to fundamental changes triggered by IT. The tenets of newly vulnerable markets theory are supported. The GDS market became newly easy to enter due to a decrease in barriers to entry caused by the Internet and other technologies, attractive to attack due to their out-of-date and inefficient pricing mechanisms which made opportunistic pickoff possible across customer profitability gradients, and difficult to defend due to their lack of vision and strategic inflexibility. We use our findings to expand the application of this theory to newly vulnerable e-markets, in general.