IT-enabled transparent electronic markets: the case of the air travel industry

Abstract

The electronic market hypothesis predicts that by reducing coordination costs, information technology (IT) will shift industrial organization from hierarchical to market-based forms of economic activity. While academic researchers and practitioners have witnessed these shifts with the advent of the Internet, there is little understanding about the process and the underlying forces that drive them. In this paper, we provide an in-depth analysis of the air travel industry, which has recently experienced significant IT-driven transformations. We conclude that, together with IT, pro-competitive laws and the information-intensive nature of air travel products have triggered competition for consumers with transparent market mechanisms, which is leading to the emergence of more transparent electronic markets in the air travel industry.

Theorizing E-Commerce Business Models: On the Impact of Partially and Fully Supported Transaction Phases on Customer Satisfaction and Loyalty

“…We slightly modified the items of both constructs to adapt them to the experimental task and the tourism context, in particular the air travel industry (Granados et al 2007). Table 1 and Table 2 show the results of the reliability analyses including consistency, convergent validity and discriminant validity.…”

Overcoming the Challenge of Cooperating with Competitors: Critical Success Factors of Interorganizational Systems Implementation

“…or ORBITZ in the airline industry (Granados, Gupta, & Kauffman, 2007), evokes challenging strategic and organizational issues. Practically, it may be more efficient that all participants in a certain industry share a common system and increase the benefits of network externalities (Shapiro & Varian, 1999;Zhu, Kraemer, Gurbaxani, & Xu, 2006).…”

“…The term IOS implementation as used in this paper encompasses both the initial adoption and the mode of continued use of IOS. Although IOS implementation concerns have been widely researched (Chwelos et al, 2001;Teo et al, 2003), studies like Granados et al (2007) that examine the implementation of the same IOS by competing organizations are rare. Geri & Ahituv (2008) have developed a model of IOS feasibility that is based on the Theory of Constraints (TOC) (Goldratt & Cox, 1986;Gupta, 2003;Mabin & Balderstone, 2000;Ronen, 2005;Ronen & Pass, 2007).…”

The Emerging Role of Vertical Search Engines in Travel Distribution: A Newly-Vulnerable Electronic Markets Perspective

“…Established firms will tend to adopt a wait-and-see approach to electronic market mediation opportunities, and will eventually reintermediate the market, often with an enhanced electronic market mechanism. For example, in 2001 five major airlines reintermediated the online travel sector with Orbitz (www.orbitz.com), which brought higher levels of transparency to consumers using stateof-the-art technology to search for and display priced travel products [19]. Established financial firms, Merrill Lynch and American Express, witnessed the entrance of cybermediaries, E*Trade and Ameritrade, and eventually introduced their own electronic trading mechanisms to compete.…”

“…On the other hand, OTAs such as Expedia and Travelocity emerged to turn the functionality and information provided by GDSs into user-friendly interfaces for travelers [19]. OTAs were a new form of intermediation that allowed consumers to access the information provided by the GDSs electronically at a low cost.…”