Competing tourism service provider introduction strategy for an online travel platform with demand information sharing

Abstract

This paper considers a tourism supply chain (TSC) where an online travel platform (OTP) that holds private demand information cooperates with an incumbent tourism service provider (TSP) through the agency model. To expand the online travel markets and improve profitability, the OTP can further introduce the competing TSP using the agency model or the wholesale model. Based on a game model, we explore the OTP’s introduction and demand information sharing strategies, and then study the Pareto improvement of the OTP’s strategy choices. We find that both the price competition intensity and the commission rate influence the OTP’s introduction choice, while the demand fluctuation and demand forecast accuracy also critically affect selection under certain conditions. In particular, the OTP may introduce the competing TSP even if the price competition is fierce. Moreover, the agency introduction strategy may hurt the OTP even though the commission rate is high under the agency model. The results also show that regardless of the chosen introduction strategy, the OTP always shares demand information with the agency cooperating TSP, and also may share it with the wholesale cooperating TSP. In addition, the OTP’s strategy choices may lend to the inefficiency of the TSC, and the Pareto improvement in introduction strategy or (and) demand information sharing strategy can be realized by implementing three types of transfer payment contracts.