It's an article of faith these days that the Internet is the great equalizer, making markets transparent like never before and giving consumers unprecedented leverage with sellers.

But a study suggests that an older maxim holds true -- even on the Internet: "The more things change, the more they stay the same." Il-Horn Hann, a doctoral student at University of Pennsylvania's Wharton School, and his two advisers decided to test just how much the Web leveled prices among airline-ticket sites -- a popular area for E-commerce. Using a high-powered server, Hann methodically queried five top online travel sites. The results were surprising: Far from converging, prices for nearly identical tickets varied as much as 15% to 20% from site to site, he found.

What does that mean for the myriad entrepreneurs who are struggling to make money on the Net? The findings suggest that Internet travel sellers -- and presumably other online merchants -- can still exploit an old retail strategy: Take advantage of most consumers' limited time and patience for comparison shopping to charge more. Or, as they say in academia: "There is an intent by the vendor to exploit information asymmetry," Hann says.

Translation: The travel seller knows more than the consumer and can use his knowledge to make more money.

VALID TESTING? That sounds like heresy to Internet believers. And one possible problem with Hann's test is that it was conducted in 1997 -- a century ago on the Web -- though he's just publicizing his findings now. Nevertheless, Hann contends that his test is still valid because the travel sites' underlying technology, which uses different mathematical formulas to respond to consumer queries, is unchanged. "I have not seen any indication that the technology has improved," Hann says. Online travel merchants agree that most changes have been with the customer interface -- not with the mechanism that chooses flights.

How objective is Hann's study? It was funded by a major real-world travel agency, but he declined to give Business Week Online the name nor would he say if the agency had online interests or an affiliation with an airline. He also declined to name the sites he queried, other than to say that they were five of the largest. The leading sites are generally considered Expedia.com, Travelocity.com, TheTrip.com, ITN.com, and PreviewTravel.com. All have airline affiliations. American Airlines' parent owns a stake in Travelocity. United indirectly operates Apollo, the computer reservation system that TheTrip, ITN, and PreviewTravel use. Northwest and Continental own WorldSpan, Expedia's database.

Hann says he decided to study online travel because it is such a large component of online buying today. Jupiter Communications says it consumed 30% of $7.1 billion in total online sales in 1998. What was Hann's method? He reran all the travel queries of his sponsor from April, 1997, sending to the five sites from 300 to 500 requests for round-trip tickets within the U.S. each day for five days.

The researchers theorized that price disparities may indicate some specialization among the Internet travel sites, though they don't advertise themselves as such. Some tend to present the lowest fares, others the best connections, and still others the closest window of time for departure. "Each agency was in some sense better and is some sense worse, depending on criteria," says Eric K. Clemons, a professor of operations and information management at Wharton and an adviser on the project.

Online travel merchants concur that they filter the information but insist that they don't target a certain type of consumer. "Our value to the customers is providing unbiased information and to shop across a variety of suppliers," says Terry Jones, president of Travelocity in Fort Worth and chief information officer of the Sabre Group Inc., the computer reservation system that powers the site. "You can search by airline, time, or price, and we will search any way you want."

The real issue, say the Wharton academics, is that consumers don't know who offers the best deal because they don't exhaustively shop around -- even on the Internet where research is only a matter of keystrokes. Convenience is still an issue. Consumers don't search all the sites because each one makes customers fill out tedious forms with personal information. On that, the online sellers agree.

"One of the barriers to exit is the profile," says Antoine K. Toffa, chief executive officer of TheTrip in Denver. "Once you have put in all your information, will you feel like doing it with two or three other services?"

Hann's research doesn't definitively disprove the price-leveling capabilities of the Net, acknowledges Clemons. After all, technological improvements may produce a more consistent selection of fares among the sites. Then there's human nature. Exasperated consumers with little time and too many choices are likely to close their eyes and point, even on the Net.

By Jeremy Quittner in New York
jeremy_quittner@businessweek.com

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