26.05.2020Value of Aggregators

Aggregators are facing increased scrutiny by regulatory authorities, suggesting these sites have considerable market power. On the other extreme, firms are bypassing ag- gregators, choosing instead to sell directly to consumers. This raises the question as to which party has more market power: the aggregator or the individual firm. Focusing on the airline industry, we investigate who benefits the most in the airline-aggregator relationship. Specifically, we ask what would happen to airline and aggregator site visits and purchases in the absence of a comprehensive aggregator. We first explore consumers’ search patterns on Southwest, an airline that has never been part of any aggregator. In a descriptive exercise, we find that consumers who book on Southwest are the least likely to visit aggregator sites. Second, we use the 2011 American dis- pute with Orbitz as an exogenous event, which led to American fares no longer being displayed on Orbitz for five months. We use this dispute to identify who was hurt the most – the aggregator or the airline – in the months following the dispute. Our findings indicate the aggregator loses the most when it is not comprehensive.