The electronic market hypothesis predicts that by reducing coordination costs, information technology (IT) will shift industrial organization from hierarchical to market-based forms of economic activity. While academic researchers and practitioners have witnessed these shifts with the advent of the Internet, there is little understanding about the process and the underlying forces that drive them. In this paper, we provide an in-depth analysis of the air travel industry, which has recently experienced significant IT-driven transformations. We conclude that, together with IT, pro-competitive laws and the information-intensive nature of air travel products have triggered competition for consumers with transparent market mechanisms, which is leading to the emergence of more transparent electronic markets in the air travel industry.
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Acknowledgments The authors would like to thank the anonymous reviewers and co-chairs of the 28th Hawaii International Conference on Systems Science in the B2B E-Commerce mini-track. We especially benefited from personal interactions and comments on the content of this work from Charles Steinfield, Fu-ren Lin, Lynne Markus, and Rolf Wigand. Rob Kauffman thanks Donna Sarppo and the MIS Research Center at the University of Minnesota for partial support. Nelson Granados acknowledges funding through a Graduate School Fellowship and thesis costs support from the University of Minnesota. Alok Gupta’s work is supported by National Science Foundation Grant #IIS-0092780, for which he kindly acknowledges funding. All errors of fact or interpretation are the sole responsibility of the authors.