# 18-077/VIII (2018-10-22; 2018-12-02)

Author(s)
Gerben de Jong, VU Amsterdam, SEO Amsterdam Economics; Christiaan Behrens, VU Amsterdam, SEO Amsterdam Economics; Hester van Herk, VU Amsterdam; Erik (E.T.) Verhoef, VU Amsterdam
Keywords:
codesharing, consumer choice behavior, incomplete information, signaling, airline industry
JEL codes:
L11, L15, L93

We examine the impact of airline codesharing on consumer choice behavior in non-stop international route markets. Using stated preference data, we document that consumer valuation of flights by alien foreign carriers is significantly higher if these flights are offered as codeshare products by consumers' own national carrier or, to a lesser extent, a neighboring national carrier. We empirically rule out quality improvements and frequent flier programs as underlying drivers and explore two alternative explanations: misconceptions about codesharing and codesharing as a quality signal. We find that misconceptions are widespread, but that they do not cause higher valuation of codeshare products. Consistent with signaling, however, codeshare products are valued higher by more risk-averse consumers and on less familiar routes.