When Do Firms Offer Higher Product Quality? Evidence from the Allocation of Inflight Amenities

We examine how competition impacts the provision of product quality. Using a unique data set of
inflight amenities provided by U.S. airlines, we find that the composition of competition matters. There is significantly higher product quality - Wi-Fi, entertainment, and at-the-seat electrical power outlets - on on more competitive routes (with lower HHI). The presence of Southwest Airlines on the route, however, is shown to reduce product quality offerings. We also find significantly higher product quality on routes with more passengers, tourist destinations, and red-eye flights. We find lower posted base ticket prices on routes with Wi-Fi and entertainment amenities.

Keywords: Airlines; Inflight Amenities; Pricing

JEL Classification: L15, L19, L93

Suggested Citation: Suggested Citation

Kim, Myongjin and Liu, Qihong and Rupp, Nicholas G., When Do Firms Offer Higher Product Quality? Evidence from the Allocation of Inflight Amenities (November 11, 2022). Forthcoming, Review of Industrial Organization, Available at SSRN: https://ssrn.com/abstract=2869213 or http://dx.doi.org/10.2139/ssrn.2869213