Title: Distance effects and product feature differentiation in a tourism duopoly

Authors: Shih-Ming Ou, Ching Chang, Yao-Hsien Lee

Addresses: Institute of Technology Management, Chung Hua University, 707, Sec. 2, WuFu Rd., HsinChu, Taiwan. ' Department of Transportation Technology and Logistics Management, Chung Hua University, 707, Sec. 2, WuFu Rd., HsinChu, Taiwan. ' Department of Financial Management, Chung Hua University, 707, Sec.2, WuFu Rd., HsinChu, Taiwan

Abstract: Many tourism companies in Taiwan|s tourism industry expect themselves to be unique in the market by means of developing featured products. Besides, they have to face the impact of distance effects on tourists| destination choice. In our research, we argue that the effect of friction of geographic distance discourage tourists to visit the tourism destination, while cognitive proximity plays the role of increasing interactions between tourism companies and their potential tourists. To acquire a better understanding of the relationship between proximity investment sizes and pricing, we employ the three-stage game approach and endogenous spillovers to discuss the differentiation strategies adopted by two competitive companies. Accordingly, we provide solutions to the three managerial problems including featured product design, increasing cognitive proximity investment size, and pricing. We also show that spillover effect is the decisive factor in tourism companies| investment decisions.

Keywords: distance effects; product differentiation; tourism duopolies; tourism companies; Taiwan; tourism industry; featured products; destination choices; friction; geographic distances; cognitive proximity; increased interactions; potential tourists; investment sizes; pricing; prices; game approaches; endogenous spillovers; three-stage games; differentiation strategies; competitiveness; product design; investment decisions; services technology; services management; model applications; tourism management.

DOI: 10.1504/IJSTM.2011.038660

International Journal of Services Technology and Management, 2011 Vol.15 No.1/2, pp.27 - 39

Available online: 18 Feb 2011 *

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