Selling Package Tours to Tourists: A Contract Theory Perspective

RIT Economics Department Working Paper No. 13-02

8 Pages Posted: 14 Mar 2013

See all articles by Olabisi Alao

Olabisi Alao

Rochester Institute of Technology (RIT) - Department of Economics

Amitrajeet A. Batabyal

Rochester Institute of Technology (RIT) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 13, 2013

Abstract

We provide the first contract-theoretic analysis of how best to sell package tours to heterogeneous tourists in an environment with asymmetrically held information. Our analysis has three practical implications. First, asymmetric information tends to hamper package tour sales. Second, some tourists (high-type) will benefit from asymmetric information but others (low-type) will not. Third, low-type tourists tend to buy package tours with inefficiently low quality and they may also be unable to buy a package tour.

Keywords: Asymmetric Information, Contract Theory, Package Tour, Tourist

JEL Classification: L83, D82

Suggested Citation

Alao, Olabisi and Batabyal, Amitrajeet A., Selling Package Tours to Tourists: A Contract Theory Perspective (March 13, 2013). RIT Economics Department Working Paper No. 13-02, Available at SSRN: https://ssrn.com/abstract=2233071 or http://dx.doi.org/10.2139/ssrn.2233071

Olabisi Alao

Rochester Institute of Technology (RIT) - Department of Economics ( email )

92 Lomb Memorial Drive
Rochester, NY 14623-5604
United States

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology (RIT) - Department of Economics ( email )

92 Lomb Memorial Drive
Rochester, NY 14623-5604
United States
585-475-2805 (Phone)
585-475-5777 (Fax)

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