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

PROPOSITION 1
. The subgame perfect Nash equilibrium total numbers of tourists for the two competitive TSCs 
with tree structure in Figure 1 are: 

---

 
2007 Annual International CHRIE Conference & Exposition 
510
2
(
)
(
)
1
i i
i
i
i i
j
j
j
j
i
i i
j
j
m n
C
m n m n
C
Q
m n m n
α
μ
α
μ
−
−
−
=
−
, 
where
1
[ ,1)
1
2
i
i
i
N
n
N
=
∈
+
,
1 1
[ , )
2
1
3 2
i
i
i
M
m
M
=
∈
+
, and
1
2
i
i
i
i
C
c
c
c
=
+
+
, 
,
,
i j
A B
=
.
To be noticed that
2
1
0
B B
A A
m n m n
μ
−
>
, when
0
1
μ
< ≤
. We additionally assume 
that
1
B B
A A
m n
m n
δ μ
μ
> >
to make sure the demand for each TSC at its equilibrium quantity is positive, 
where
A
A
B
B
C
C
α
δ
α
−
=
−
. More equilibrium results are summarized as followings: 
(1) Quantity 
1
2
(
)
(
)
(1
)
A A
A
A
A A
B B
B
B
A
A A
B B
A
m n
C
m n m n
C
q
m n m n N
α
μ
α
μ
−
−
−
=
−
, 
2
2
(
)
(
)
(1
)
A A
A
A
A A
B B
B
B
A
A A
B B
A
m n
C
m n m n
C
q
m n m n M
α
μ
α
μ
−
−
−
=
−
, 
2
(
)
(
)
1
A A
A
A
A A
B B
B
B
A
A A
B B
m n
C
m n m n
C
Q
m n m n
α
μ
α
μ
−
−
−
=
−
. 
(2) Price 
2
1
2
2
(1
)(
)
(1
)(
)
1
1
A A
B B
A
A
B B
A A
B
B
A
A
A A
B B
A A
B B
m n
m n
C
m n
m n
C
p
m n m n
m n m n
μ
α
μ
α
α
μ
μ
−
−
−
−
=
−
−
−
−
, 
2
2
2
2
(
)
(2
1)(1
) (2
1)(1
)
A
A
B B
B
B
A
A
A
A A
B B
A
A A
B B
C
m n
C
p
c
M
m n m n
M
m n m n
α
μ
α
μ
μ
−
−
=
+
−
+
−
+
−
, 
2
2
(
)
(
)
1
1
A
A
A
A
B B
B
B
A
A
A A
B B
A A
B B
m
C
m m n
C
p
c
m n m n
m n m n
α
μ
α
μ
μ
−
−
=
+
−
−
−
. 
(3) Unit profit 
1
1
2
1
1
A
A
A
A
A
A
A
km
f
p
p
p
c
N
=
−
−
−
=
+
,
2
2
2
2
1
A
A
A
A
k
f
p
c
M
=
−
=
+
,
A
A
A
A
f
p
c
km
=
−
=
, 
where
2
(
)
(
)
1
A
A
B B
B
B
A A
B B
C
m n
C
k
m n m n
α
μ
α
μ
−
−
−
=
−
. 
(4) Profit 
2
1
(
)
A
A
A
Q
N
π
=
,
2
2
1
(
)
A
A
A
A
A
N
Q
N
M
π
+
=
,
2
3
(
1)
A
A
A
A
N
Q
N
π
+
=
. 
A Nash equilibrium is a set of strategies, one for each player, such that no player has incentive to 
unilaterally change her action. In other words, equilibrium strategy is a player’s optimal choice given others’ 
strategies, so that any change would lead he to earn less than if he remained with his current strategy. Hence, the 
equilibrium shows the clear direction to performance improvement and correctly forecast other players’ behaviors. 
In next section, based on equilibriums from Proposition 1, the competition dynamics in TSCs are investigated and 
discussed. 
FINDINGS 
TSC is a dynamic system in which the individual variables are tightly coupled together, and strongly 
interact with one another and rest of the entities in system. In this section, four impact parameters are identified: 

---

 
2007 Annual International CHRIE Conference & Exposition 
511
market scale, supply chain cost, supply chain membership, and supply chain loyalty. Changes of those preferences 
have significant influences on TSC performance. Four key performance indexes are checked, which are tourist 
quantity, price, unit profit and profit. All the theoretical results are induced by propositions. 
Impact of Market Scale 
Market scale describes the volume of potential tourists of tourism productions. In our model, market scale 
is presented by parameter
α
. Following proposition gives the impact of market scale on system equilibriums: 
PROPOSITION 2. 
Suppose that if 
A
α
increases, results are shown in following: 
 
Quantity Price 
Unit Profit 
Profit 
TO 
↑
 
↑
 
↑
 
↑
 
HA 
↑
 
↑
 
↑
 
↑
 
A
TSC
 
TP 
↑
 
↑
 
↑
 
↑
 
TO 
↓
 
↓
 
↓
 
↓
 
HA 
↓
 
↓
 
↓
 
↓
 
B
TSC
 
TP 
↓
 
↓
 
↓
 
↓
 
Impact of Tourism Supply Chain Cost 
Supply chain cost presents all the expenditure happened by tourism enterprises when one tourist 
“consumes” his package holiday. It’s comprised of unit costs from all the three sectors. In our model, supply chain 
cost is presented by parameter
A
C
. Following proposition gives the impact of supply chain cost on system 
equilibriums: 
PROPOSITION 3
. Suppose that if 
A
C
increases, results are shown in following: 
 
Quantity Price 
Unit Profit 
Profit 
TO 
↓
 
↑
 
↓
 
↓
 
HA 
↓
 
↑
a
/ 
↓
b
 
↓
 
↓
 
A
TSC
 
TP 
↓
 
↑
c
/ 
↓
d
↓
 
↓
 
TO 
↑
 
↑
 
↑
 
↑
 
HA 
↑
 
↑
 
↑
 
↑
 
B
TSC
 
TP 
↑
 
↑
 
↑
 
↑
 
a
Costs of TP and TO increase; 
b
Cost of HA increases. 
c
Cost of TP increases; 
d
Costs of TO and HA increase. 
Impact of Tourism Supply Chain Membership 
The number of TSC members determines TSC’s capability and the degree of three types of competitions. 
Following propositions gives the impact of TSC members on system equilibriums: 
PROPOSTION 4
. Suppose that the number of 
A
TSC
members (
A
N
/
A
M
) increases, results are shown in 
following: 
 
Quantity Price 
Unit Profit 
Profit 
TO 
↓
a
/ 
↑
b
 
↓
 
↓
a
/ 
↑
b
 
HA 
↑
a
/ 
↓
b
 
↑
a
/ 
↓
b
A
TSC
 
TP 
↑
 
↑
 
↑
 
↑
 
TO 
↓
 
↓
 
↓
 
↓
 
HA 
↓
 
↓
 
↓
 
↓
 
B
TSC
 
TP 
↓
 
↓
 
↓
 
↓
 
a
Number of TO increase; 
b
Number of HA increase. 
PROPOSTION 5
. In
A
TSC
, if the number of TO/HA increases, total surplus of the TO/HA sector decrease, while 
total surplus of 
A
TSC
increases. 

---

 
2007 Annual International CHRIE Conference & Exposition 
512
Impact of Tourism Supply chain loyalty 
 
Supply chain loyalty captures the difference between the customers’ preference for the two TSCs. It’s 
negatively associated with the level of the cross-quantity sensitivity
μ
in our model. Because of symmetry, we only 
emphasize on impact of one TSC, for example
A
TSC
. Following proposition gives the impact of supply chain 
loyalty on system equilibriums: 
PROPOSITION 6
. Suppose 
μ
increases, and if
1
1
(
)
2
B B
A A
m n
m n
δ
μ
μ
<
+
, results are shown in following: 
 
Quantity Price 
Unit Profit 
Profit 
TO 
↓
 
↓
 
↓
 
↓
 
HA 
↓
 
↓
 
↓
 
↓
 
A
TSC
 
TP 
↓
 
↓
 
↓
 
↓
 
The opposite is concluded if
1
1
(
)
2
B B
A A
m n
m n
δ
μ
μ
>
+
. 
APPLICATION OF RESULTS 
Based on the theoretical results from previous section, further analyses corresponding to each parameter are 
given in this section. Many managerial implications are derived. A numerical example and a figure are illustrated for 
the thorough understanding. 
Impact of Market Scale 
Proposition 2 illustrates that increment of market scale has positive effort on the TSC and negative 
influence on competitive TSC for all the performance indexes. Banker, Khosla, and Sinha (1998) assumed that total 
market scale was consistent, which implied 
A
B
α
α
α
+
=
in our model. In this assumption, increment of one TSC 
market size is along with decrement of the other, which magnifies the influence. 
There are two implications about this Proposition. First, if a manager in TSC observes increment of market 
scale, he should properly raise price or quantity decision without losing market sharing, and then get more profit. 
Second, if a manager perceives market scale increasing in competitive supply chain, the optimal strategy is lowing 
down the decision variables. This reaction would decrease final market price, making it more attractable, but can’t 
stop the fallings of market share, unit profit and profit. 
Therefore, supply chain members have strong incentive to enlarge market scale. There are two different 
ways: passive one and initiative one. For instance, economic prosperity, political stabilization, and traffic condition 
update advantage tourism development in the long run. Those external influences have the same effect for both 
TSCs, and all enterprises are benefit passively. In the initiative aspect, advertising is the most popular approach. 
Mostly, TP uses national/international advertising to strengthen the image of its brand and attract potential 
consumers, while the local advertising by TO aims to gain short-term sales. Another fashion of advertising is 
cooperative advertising which is an arrangement where the TP pays some or all of the cost of the local advertising 
undertaken by TOs (Jørgensen, Taboubi, and Zaccour 2001). Details can refer to Huang and Li (2001) who have 
shown comprehensive analyses of this advertising strategy.