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Internet Penetration and Capacity Utilization in the US Airline Industry

Author

Listed:
  • James D. Dana Jr.
  • Eugene Orlov Jr.

Abstract

Airline capacity utilization increased dramatically between 1993 and 2007, after staying fairly level following deregulation. We argue that consumers' use of the Internet to investigate and purchase airline tickets reduces market frictions and allows airlines to meet demand with less capacity and higher load factors. We find that differences in the rate of change of metropolitan area Internet penetration are positively correlated with differences in the rate of change of airlines' airport-pair load factors. Consistent with our explanation, this correlation is greater on flights in more competitive markets and on flights with fewer total passengers.

Suggested Citation

  • James D. Dana Jr. & Eugene Orlov Jr., 2014. "Internet Penetration and Capacity Utilization in the US Airline Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 106-137, November.
    • Handle: RePEc:aea:aejmic:v:6:y:2014:i:4:p:106-37
    Note: DOI: 10.1257/mic.6.4.106
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management

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