Abstract
This paper studies the service commission contract of an online travel agency (OTA) to integrate the online to offline (O2O) model by cooperation with a traditional travel agency (TTA) under asymmetric information. The principal-agent models are established with symmetric and asymmetric service information, respectively. Further, the impacts of asymmetry information on the revenue of the OTA, TTA, and the whole O2O model and the properties of optimal commission contract are analyzed. The paper notes management implications: (1) OTA designs service commission contracts by weighing the fixed payment and service commission coefficient for different incentives to TTAs with different serviceabilities and (2) because the existence of asymmetric information always leads to the damage of OTA’s expected revenue, OTA should encourage the TTA to disclose private service information.
Highlights
With the rapid development of Internet and information technology, it is a popular and convenient way for tourists to buy more diverse tourism products and services through online travel agencies (OTAs) [1,2,3]
To enrich the scientific literature and provide some suggestions to OTA on how to pursue offline service, this paper studies the optimal service contract of OTAs under asymmetric information through the analysis of a simple O2O model composed of an OTA and a traditional travel agency (TTA)
When the TTA is of a low serviceability type, the asymmetric information makes the service commission coefficient tilt downward and fixed payment cost rise, and the rise of fixed payment can make up for the loss of TTA caused by the decline of service commission coefficient
Summary
With the rapid development of Internet and information technology, it is a popular and convenient way for tourists to buy more diverse tourism products and services through online travel agencies (OTAs) [1,2,3]. To improve competitive advantage and realize differentiation, some OTAs (e.g., Ctrip) open up offline stores to achieve online to offline (O2O) model for providing personal information and advice to tourists, and some cooperate with traditional travel agencies (TTAs), such as Uzai (http:// www.uzai.com/) and ZhongXin TTA, Lvmama (http:// www.lvmama.com), and JinJiang TTA [4]. In the process of cooperation between OTAs and TTAs, it is difficult for OTAs to observe TTAs’ service information, which makes the cooperation and incentive problem more complicated. With the rapid development of OTAs, the online channel plays a crucial role in tourism and hospitality, and the tourism O2O model achieved by the cooperation between OTAs and hotels or airlines is a common phenomenon.
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