Forming cognitions by investing in a form: Frequent Flyer Programs in US air travel post-deregulation (1981–1991)

Abstract

This paper addresses the link between action and cognition in markets. Increasing reliance on markets to co-ordinate economic activity across diverse contexts underscores the need to better understand how such coordination is achieved and how it can be changed. Our starting point is sense-making in formal organizations and markets. We argue that, whereas focusing on intersubjective agreements supported by frequent communication provides useful insights on coordination in formal organizations, coordination in markets cannot rely on these mechanisms alone. We borrow Thévenot's (1984) notions of form and investments in form to show how cognition and action are interrelated, and coordination achieved, in market settings. A form is characterized by its capacity to generate temporal and spatial equivalencies, allowing us to move from the particular (e.g., one exchange episode) to the generic (e.g., recurrent exchanges with particular types of customers). The development of a form helps construct common contexts of action which become the basis for coordinated actions.Our empirical case describes how the introduction of Frequent Flyer Programs created a new market form following the US Airline Deregulation Act (1978). Under the previous regulatory regime, the US Civil Aeronautics Board controlled routes and prices and airlines were limited to competing on frequency and quality of service. We show how successive rounds of investments by a variety of market actors helped articulate and consolidate the new market form over a 10-year period. Whereas action preceded cognition in the early stages, the gradual consolidation of the new form provided opportunities for market participants to gain reflexive distance and conjure up further ways to engage with the form.