Abstract
This paper proposes a framework to analyse the impact of online travel agency (OTA) when it steps into an original market of a traditional travel agency (TTA). Based on the multinomial logit choice model, the demand model and the profit model are presented. Then, the demand squeeze, the total demand increase and the cooperation range of wholesale price are analysed. From the analysis, the results indicate that: (1) OTA can increase the demand of the whole market while it squeezes the demand of TTA; (2) The demand squeeze, total demand increase and the range of cooperation wholesale price are all positive with the perceived value from OTA and negative with the perceived value from TTA. (3) The more immature the market is the more necessary for TTA to cooperate with OTA. In addition, numerical example and sensitivity analysis of perceived value and price are presented to illustrate the demand squeeze, demand increase and cooperation range of wholesale price.
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