Publication of Information and Market Response: The Case of Airline on Time Performance Reports

Abstract

This paper investigates market response to publication of on time performance information. Theory suggests that reduction in search costs generates more honest airlines and better quality service, a distribution of price-quality bundles, increased demand, exit by inefficient airlines and reduction of price rigidity. An ARIMA study of U.S. domestic airline operations finds that after publication of performance information the market generated better performance, increased quality distribution, enhanced demand, exit by four of fourteen airlines and reduced price-quality rigidity. Publication of information may improve performance in markets characterized by asymmetric information and high search costs.