Game-Theoretic Approach to Competition Dynamics in Tourism Supply Chains

Abstract

This article considers two tourism supply chains (TSCs). Each TSC is assumed to consists of three sectors with the following service providers—a theme park operator, accommodation providers, and tour operators. Game theory is used to investigate the cooperation and competition between these two TSCs, between the three sectors within each TSC, and between the enterprises within each sector when configuring and marketing package holidays. Several important findings are obtained. First, a larger membership in each of the TSC sectors strengthens the sector's overall capacity and intensifies the internal competition, thus reducing members' profits while other sectors benefit from this internal competition. Second, decision makers of the two competing TSCs should adopt appropriate product differentiation strategies by carefully positioning their package holiday products to optimize their performance. Third, the theme park would benefit from integration with the accommodation provider. There exists a win-win situation in which the performances of both TSCs could be improved, if the integration adequately increases the TSCs' preference.