Microsoft Word 2007 ichrie conference Proceedings Final-Final 06-06-07. doc

Figure 1
Tourism Supply Chain Structure 
Hotel & 
Accommodation
provider
◆
Chain Competition
▲
Inter-sector Competition
☆
Vertical Sector Competition
Theme
Pack
Tourism 
Operator
TSC
TSC
▲
▲
☆
☆
Theme
Pack
Tourism 
Operator
TSC
TSC
▲
▲
☆
☆
◆
Hotel & 
Accommodation
provider
★
★
Horizontal Sector Competition
★
Hotel & 
Accommodation
provider
◆
Chain Competition
▲
Inter-sector Competition
☆
Vertical Sector Competition
Theme
Pack
Tourism 
Operator
TSC
TSC
▲
▲
☆
☆
Theme
Pack
Tourism 
Operator
TSC
TSC
▲
▲
☆
☆
◆
Hotel & 
Accommodation
provider
★
★
Horizontal Sector Competition
★
In the formulation, 
A
TSC
and 
B
TSC
present the two TSCs respectively. Subscripts A and B will be omitted 
when single chain discussed, and -1 in subscript represents the rival (competitive) TSC. There are 
N
TOs and 
M
HAs in a TSC, indexed by 
1...
i
N
=
and
1...
j
M
=
. Variable unit cost of TH, HA, and TO are 
c
,
2
c
and
1
c
respectively. We assume a linear inverse price function for 
i
TO
as 
1
1
i
p
Q
Q
α
μ
−
= − −
(1) 
where 
1
i
p
is price of package holiday product, 
Q
and 
1
Q
−
are total tourists in the TSC and its rival TSC. The 
decision variable is tourist quantity 
i
q
for
i
TO
. Here, 
α
represents the market scale. If 
1
0
i
p
=
and
1
0
Q
−
=
, 
then
Q
α
=
. It implies the possibly maximal demand for package holiday supplied by TSC when package holiday is 
free and no tourists buy rival’s product. Parameter 
μ
captures the cross-quantity sensitivity or supply chain loyalty 
in terms of two TSCs. Supply chain loyalty describes the difference between the customers’ preference for the two 
TSCs. TSC with loyal consumers would be able to maintain higher prices (Alegra and Juaneda 2006). It is plausible 
to assume that 
μ
increases while the supply chain loyalty decreases. Supply chain loyalty could also be specialized 
as brand loyalty for particular theme park in this paper, as theme park is main motivation for tourists to visit 
destination. To our research objective, we limit our attention within
0
1
μ
< ≤
, which means two TSCs have clear 
substitutes or competitive relationship. Specially, if
1
μ
=
, then products of package holiday are perfect substitutes.

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