This paper studies airline customers' online search and purchase behaviors. Twofundamental aspects of online behavior are examined: (1) the link between searchbehavior and buying behavior and (2) the evolution of inter-temporal search andpurchase decisions of strategic buyers.In the first study, we examine online customers' dynamic conversion behaviors usingclickstream data. A new model based on Markov chains that incorporates discretechoices and decision-timing is proposed to capture key search effects on consumer decisionsas well as dynamics of browsing behavior both within and across visits. Empiricalresults show that within-site search activities lead to strong consumer engagementand thus increase purchase and revisit propensities. Fit comparison between first andsecond order Markov chains allows us to conclude that consumer decisions are primarilyinfluenced by the current search. Furthermore, we observe that consumersdynamically adjust their browsing behavior both within and across visits.The second study investigates the evolution of inter-temporal search and purchasedecisions of strategic buyers. Risk neutral buyers follow simple behavioral rules basedon future and current prices and options available. We show that the trade-off betweenwaiting and purchasing will become less and less favorable to waiting. Priceelasticity should therefore drop as departure date approaches. With stationary pricedistributions, search and purchase efforts increase with proximity to the deadline. Weextend the base model to allow for price evolution and demand uncertainty. We findthat increases in mean price and price dispersion may attenuate increasing propensitiesfor search and purchase. We demonstrate our models through a logit estimationon a unique data set from a major online travel agency.
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Airline passengers' online search and purchase behaviors
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