Platforms in two-sided markets are known to provide subsidies to either buyers or sellers, in order to take advantage of cross-group externalities inherent in such industries. Online travel agents can be thought of as platforms facilitating trade between passengers and travel service providers (airlines). This chapter evaluates the effects of a buyer subsidy provided by one major US online travel agent – a low-price guarantee offered by Orbitz. We find evidence consistent with increased airline participation with this travel agent upon implementation of the low-price guarantee policy. Our results also confirm the theoretical claims that most-favored customer low-price guarantee policies are procompetitive.
Bilotkach, V. and Rupp, N.G. (2014), "Buyer Subsidies in Two-Sided Markets: Evidence from Online Travel Agents", The Economics of International Airline Transport (Advances in Airline Economics, Vol. 4), Emerald Group Publishing Limited, Leeds, pp. 339-374. https://doi.org/10.1108/S2212-160920140000004012
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