Strategic impacts of IT-enabled consumer power: Insight from Internet distribution in the U.S. lodging industry

Grounded in search theory, and set in the context of the U.S. lodging industry, our study focused on consumer power and two of its facets: the relationship between buyers and sellers, and the role of traditional intermediaries. We sought to contribute to the search literature and its explanation of the role of IT progress on consumer power by investigating the relationship between prices and consumer search activity, the ability of consumers to bypass traditional intermediaries, and the conditions under which suppliers can respond to the apparent increase in consumer power. We used a dataset of 31,644 observations representing daily availability and reservation transactions for 79 lodging brands collected over a nine-month period. Our results provided both support for the general tenets of search theory and some interesting extensions, indicating that there was a negative, non-linear relationship between aggregate consumer search activity and product price. We found that consumers, although less efficient, search more than traditional intermediaries and, as a consequence, find lower prices. Finally, we found support for the proposition that product differentiability moderates the relationship between aggregate search activity and product price.