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Abstract

The package tour market is information-intensive in nature. Its complex information structure is generally inaccessible to tourists, whose purchase behavior may be affected by the extent to which they can access such information. This study shows that package tours can be structured by both tour operators’ bundling strategy and tourist preference, resu lting in different qualities of package tours. A model of adverse selection is developed to explain tourists’ exclusive choice of low-quality package t ours, as they have little information about tour operators’ bundling strategy. It concludes that tourists who possess less information of tour operators’ bundling strategy are more likely to purchase low-quality package tours, resulting in adverse selection of package tours.

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