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

Forthcoming, Review of Industrial Organization

32 Pages Posted: 15 Nov 2016 Last revised: 15 Nov 2022

See all articles by Myongjin Kim

Myongjin Kim

University of Oklahoma - Department of Economics

Qihong Liu

University of Oklahoma - Department of Economics

Nicholas G. Rupp

East Carolina University - Department of Economics

Date Written: November 11, 2022

Abstract

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

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

Myongjin Kim

University of Oklahoma - Department of Economics ( email )

308 Cate Center Drive
Norman, OK 73019-2103
United States

Qihong Liu (Contact Author)

University of Oklahoma - Department of Economics ( email )

Norman, OK 73019-2103
United States
405-325-5846 (Phone)

HOME PAGE: http://qliu.oucreate.com

Nicholas G. Rupp

East Carolina University - Department of Economics ( email )

Brewster Building
Greenville, NC 27858
United States
252.328.6821 (Phone)
252.328.6743 (Fax)

HOME PAGE: http://myweb.ecu.edu/ruppn/

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