The Market Response to the Sioux City DC‐10 Crash

Abstract

The 1989 DC-10 crash at Sioux City, Iowa presented a rare instance in which a potential threat to safety was both (i) intensely publicized over a short period and (ii) also amenable to the unobtrusive measurement of the market reaction it evoked. As such, it allowed a useful case study of the extent and duration of behavior change caused by a frightening event. Using reservations data from travel agencies in five states, this paper estimates the short-term effects of the Sioux City crash on passenger willingness to fly the DC-10. The data suggest that, in the first few weeks after the crash, more than one third of travelers who would normally have booked DC-10 flights chose instead to fly other aircraft. Within 2 months of the disaster, however, DC-10 bookings rebounded to within 10% of the level that would have been expected had the Sioux City crash not occurred. At no time, apparently, did the airlines that operate DC-10s use their "yield-management" computer pricing systems unofficially to lower DC-10 fares relative to those on other types of plane.

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