Buyer subsidies in two-sided markets: Evidence from online travel agents

Bilotkach, V; Rupp, NG

doi:10.1108/S2212-160920140000004012

Buyer subsidies in two-sided markets: Evidence from online travel agents

Lookup NU author(s): Dr Volodymyr Bilotkach

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Abstract

© 2014 by Emerald Group Publishing Limited. 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.