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

OBSERVATION
.
 
As for a certain sector, the influence of a new direct competitor is greater than that of a new 
indirect competitor. 
Figure 2
Supply Chain Loyalty in Different Situations 
 
Impact of Tourism Supply chain loyalty 
Proposition 6 tells us that the impacts of supply chain loyalty on all the members in the same TSC keep 
consistent. As a standard assumption in many economic literatures, supply chain or brand loyalty of customers 
decreasing mostly leads to low performance. However, Proposition 4 releases that difference parameter settings lead 
to reverse efforts in competitive environment. 
In order to get comprehensive understanding, figure 2 is developed for illustration. The curve of 
1
1
( )
(
)
2
B B
A A
g
m n
m n
μ
μ
μ
=
+
is presented. 
( )
g
μ
has bottom value when 
1
A A
B B
m n m n
μ
=
denoted by
μ
′
in figure 2. By the range of 
i
m
and
i
n
, we obtain
1
μ
′ >
. Recall 
1
0
μ
≥ >
and
1
B B
A A
m n
m n
δ μ
μ
> >
(equal to 
1
A A
m n
μ
δ
<
and
B B
m n
δ
μ
<
), so there are six instances (
Max
μ
is the upper limit value of
μ
): 
(1) 
1
1
B B
A A
m n
m n
δ
δ
>
>
(equal to 
1
B B
A A
A A
m n
m n
m n
δ
> >
) 
Max
μ
μ
( )
g
μ
1
δ
2
δ
*
μ
μ′
0 

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2007 Annual International CHRIE Conference & Exposition 
515
In this instance
1
0
μ
≥ >
. The minimum value of 
( )
g
μ
is 
1
1
1
(
1)
(
) (
,
)
2
Max
B B
B B
A A
A A
A A
m n
g
m n
m n
m n m n
μ
= =
+
∈
. There are two possibilities with 
δ
illustrated as the 
line
1
(1)
g
δ
<
and the line
2
(1)
g
δ
>
in the figure 2. 
(2) 
1
1
A A
B B
m n
m n
δ
δ
>
>
(equal to 
B B
B B
A A
m n
m n
m n
δ
> >
) 
In this instance
1
0
μ
≥ >
. One easily proves that
(
1)
Max
g
δ
μ
<
=
. The line
1
δ
characters this instance in the 
figure 2. 
(3) 
1
1
B B
A A
m n
m n
δ
δ
> >
(equal to 
1
1
A A
A A
m n
m n
δ
μ
> >
) 
In this instance
1
0
A A
m n
μ
δ
> >
. It’s obviously that
1
(
)
Max
A A
g
m n
δ
μ
δ
>
=
. Thus, this instance is 
correspondence to the line
2
δ
in the figure 2. 
(4) 
1
1
A A
B B
m n
m n
δ
δ
> >
(equal to 
B B
B B
m n
m n
δ μ
> >
) 
In this instance
0
B B
m n
δ
μ
> >
, we verify that
(
)
Max
B B
g
m n
δ
δ
μ
<
=
. Thus, this instance is 
correspondence to the line
1
δ
in the figure 2. 
(5) 
1
1
B B
A A
m n
m n
δ
δ
>
>
and (6) 
1
1
A A
B B
m n
m n
δ
δ
>
>
These two instances could not exist because of confliction existing within the conditions. 
Table 2 
 Summary of four possible instances of supply chain loyalty 
Case 
1
1
A A
A A
m n
m n
δ
μ
> >
1
B B
A A
A A
m n
m n
m n
δ
> >
B B
B B
A A
m n
m n
m n
δ
> >
B B
B B
m n
m n
δ μ
> >
Line 
2
δ
1
δ
or 
2
δ
1
δ
1
δ
Table 2 sums up the all the existed instances. In order to give clear picture, sequence of instances is 
rearranged. Notice that 
A
A
B
B
C
C
α
δ
α
−
=
−
implies competence ratio of two TSCs. 
δ
is bigger while 
A
TSC
has larger 
market scale and lower supply chain cost. Based on proposition 6, there are three managerial implementations from 
above discussions. First, if two TSCs are almost with the same competences or the TSC is weaker than his rival like 
in instance 2 and 4 corresponding to the line
1
δ
. The condition 
1
1
(
)
2
B B
A A
m n
m n
δ
μ
μ
<
+
is always hold, which 
means the performance of TSC decrease with increment of
μ
. TSC Manager should build up supply chain loyalty. 
Second, if TSC is much more powerful than his rival like in instance 3, then supply chain manager’s action depends 
on current loyalty. If current loyalty is high satisfying
1
1
(
)
2
B B
A A
m n
m n
μ
δ
μ
+
>
, he should continue developing 

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2007 Annual International CHRIE Conference & Exposition 
516
it. Otherwise, he should take opposite action. Third, if TSC is more powerful than his rival but not so much like in 
instance 1, TSC manager should firstly identify situation, then take action referenced to former two cases. 
 
CONCLUSION 
This paper has formulated a multi-stage game framework for studying the collaboration and competition 
dynamics in tourism supply chains for package holidays. Three sectors are considered. They are tourism operators, 
hotel & accommodation providers, and theme park operators. Three types of competition are analyzed theoretically. 
They are the supplier competition between suppliers within a sector, the sector competition between sectors in 
certain supply chain, and the chain competition between two TSCs. In the proposed game, the theme park operator 
sector and the hotel & accommodation providers sector take their moves first, and the tour operators sector takes the 
second move. Backwards induction has been proposed to solve this game. The tour operators first determine the 
optimal number of tourists they served. The prices deriver from tour operator sector is for the hotel & 
accommodation providers and the theme park operator make their decisions respectively. Combining the results, 
then jointly considering two TSCs shows the subgame perfect Nash equilibrium. 
Base upon the equilibrium results, the impacts of four systemic parameters have been studied. They are 
market scale, supply chain cost, supply chain membership, and supply chain loyalty. Four performance indexes, 
namely, quantity, price, unit profit and profit, have been selected to measure their impacts. Impacts of supply chain 
membership on sectoral and TSC surplus have also been investigated. Moreover, numerical studies have been 
conducted to demonstrate the influences of new competitor entering a sector. The trend has been developed to 
further understand the impact of supply chain loyalty in different situations. 
Several managerial implications have been derived from this study. Firstly, in order to take up market 
advantages, enterprises in TSC should cooperate in broadening market scale, and reducing supply chain cost. 
Secondly, more members in the tourism supply chain strengthen its overall capacity. However, increased 
competition due to increased TSC membership in a sector reduces enterprise’s profit as well as sectoral surplus, 
while enterprises from other sector benefit from the competition within this sector. Third, building up supply chain 
loyalty does not necessarily improve performance of TSC. Loyalty buildup strategy should be taken (1) when the 
TSC is weak in the sense of small market scale and high supply chain cost compared to its rival, or (2) when current 
supply chain loyalty is high. 
Our paper makes a unique contribution to tourism research in three ways. First, most previous studies focus 
on a single tourism enterprise/sector. Our analyses explore enterprises’ behaviors in the context of supply chain, 
which enlarges research scope in tourism. Second, this research is an early contribution to extending the game-
theoretic framework for studying tourism supply chains, since majority of existing literature is related to production 
supply chains. Finally, this paper is an original study on collaboration and competition dynamics in tourism supply 
chains as compared with existing studies on manufacturing supply chain dynamics (Swaminathan, Smith, and Sadeh 
1998; Souza, Zice, and Chaoyang 2000; Riddalls and Bennett 2002; Disney and Towill 2003).
The research can be extended further in several directions. Firstly, the model could be directly relaxed to 
multiple sectors, not only tour operator, hotel & accommodation provider, and theme park operator, but also 
transportation, restaurant and shopping center etc. Government could also be recognized as a player who cares about 
welfare or overall profit in our framework. Secondly, in this paper, price or quantity is one and only decision 
variable of tourism enterprises. However, others like service quality and advertising etc. also influent on the 
performance of tourism supply chain. Multiple dimensions of enterprise’s decision model in the context of tourism 
supply chain could be discussed in further research. Thirdly, the analyses could be under different coordination 
scheme. For example, there could be a dominant tour operator and a competitive fringe, or some tour operators 
vertically integrate the hotel & accommodation providers. Finally, the use of constraint capacity of each tourism 
sector may yield different and interesting results in the analysis for competition dynamics of tourism supply chain.