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Abstract
This research considers incentive contracts between tour guides and travel agencies. Tour guides play an important role in achieving the overall service quality of the tourism industry. The service quality of tour guides can be improved by service efforts and service abilities that are asymmetric information for the travel agency. Two types of incentive contracts are commonly used by the travel agency to motivate tour guides to improve their service quality. One is a pooling contract with only differentiated service efforts, the other is a menu contract with both differentiated service efforts and service abilities. The results of analysis and simulation show that the menu contract dominates the pooling contract. Menu contracts can not only screen the service abilities of tour guides, but also motivate tour guides to improve service efforts. Moreover, menu contracts improve the utilities of the travel agency, and strengthen the relation between the travel agency and tour guides, leading to overall enhanced service quality of the tourism industry.
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