Title: Travel agency referral and retailer competition

Authors: Kenichi Ohkita; Kazumitsu Minamikawa

Addresses: Graduate School of Management, Kagawa University, 2-1 Saiwai-cho, Takamatsu, Kagawa, 760-8523, Japan ' Department of Business Administration, Nanzan University, Yamazatocho, Showa-ku, Nagoya, 466-8673, Japan

Abstract: Tourists are one of the main market segments for service providers such as parks, museums, restaurants, and retailers. Travel agencies expose tourists in their package tours to service providers for a referral fee. This paper studies the competitive effects of travel agency referral in a setting where differentiated products are sold by two competing service providers. Using a simple spatial competition model, a non-cooperative game is analysed with informed tourists where duopolistic service providers compete on price, focusing on equilibrium prices and the profit of each service provider. This paper shows that referral is beneficial except where the cost of referral is too high. Service providers employ travel agency referral in order to mitigate the intensity of price competition by committing to higher prices.

Keywords: tourism; travel agency referrals; retailer referral strategies; retailer competition; consumer welfare; retail prices; pricing strategy; price competition; tour packages; non-cooperative games; travel agencies; retailing; package tours; equilibrium prices; profits; referral fees.

DOI: 10.1504/WREMSD.2016.079317

World Review of Entrepreneurship, Management and Sustainable Development, 2016 Vol.12 No.4, pp.457 - 466

Received: 19 Jan 2015
Accepted: 19 Jan 2015

Published online: 27 Sep 2016 *

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