IDEAS home Printed from https://ideas.repec.org/a/eee/touman/v38y2013icp43-54.html
   My bibliography  Save this article

Quality deterioration in package tours: The interplay of asymmetric information and reputation

Author

Listed:
  • Chen, Yong
  • Mak, Barry
  • Li, Zhou

Abstract

Asymmetric information in the tourism industry has been regarded as a fundamental cause of quality deterioration of travel services. This study aims to explain such quality deterioration by modeling the interplay of asymmetric information and reputation in package tours. This model is composed of eight hypotheses which regard asymmetric information of product knowledge and effort as a cause on the one hand and tour operators' reputation as a mediator in alleviating quality deterioration on the other. By applying this model to China's outbound tourism market with a cross-sectional survey from December 2010 to June 2011, six hypotheses of the model are supported. The results have shown that asymmetric information measured by tourists' perception of effort results in low service quality at the destination and that tour operators' reputation has a significant role to play in mitigating tourists' price sensitivity in the source market and improving service quality at the destination.

Suggested Citation

  • Chen, Yong & Mak, Barry & Li, Zhou, 2013. "Quality deterioration in package tours: The interplay of asymmetric information and reputation," Tourism Management, Elsevier, vol. 38(C), pages 43-54.
    • Handle: RePEc:eee:touman:v:38:y:2013:i:c:p:43-54
    DOI: 10.1016/j.tourman.2013.02.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0261517713000617
    Download Restriction: no
    File URL: https://libkey.io/10.1016/j.tourman.2013.02.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stiglitz, Joseph E., 1989. "Imperfect information in the product market," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 13, pages 769-847, Elsevier.
    2. Chiappori, Pierre-Andre & Durand, Franck & Geoffard, Pierre-Yves, 1998. "Moral hazard and the demand for physician services: First lessons from a French natural experiment," European Economic Review, Elsevier, vol. 42(3-5), pages 499-511, May.
    3. Steven Tadelis, 1999. "What's in a Name? Reputation as a Tradeable Asset," American Economic Review, American Economic Association, vol. 89(3), pages 548-563, June.
    4. Newell, Stephen J. & Goldsmith, Ronald E., 2001. "The development of a scale to measure perceived corporate credibility," Journal of Business Research, Elsevier, vol. 52(3), pages 235-247, June.
    5. Franziska Völckner & Julian Hofmann, 2007. "The price-perceived quality relationship: A meta-analytic review and assessment of its determinants," Marketing Letters, Springer, vol. 18(3), pages 181-196, September.
    6. Amy Finkelstein & James Poterba, 2004. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 183-208, February.
    7. Jeffrey C. Ely & Juuso Välimäki, 2003. "Bad Reputation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 785-814.
    8. John A. List, 2006. "The Behavioralist Meets the Market: Measuring Social Preferences and Reputation Effects in Actual Transactions," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 1-37, February.
    9. Geoffrey Heal, 1976. "Do Bad Products Drive Out Good?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 499-502.
    10. George J. Mailath & Larry Samuelson, 2001. "Who Wants a Good Reputation?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(2), pages 415-441.
    11. Carl Shapiro, 1982. "Consumer Information, Product Quality, and Seller Reputation," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 20-35, Spring.
    12. Steven Tadelis, 2003. "Firm reputation with hidden information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 635-651, March.
    13. Paul Resnick & Richard Zeckhauser & John Swanson & Kate Lockwood, 2006. "The value of reputation on eBay: A controlled experiment," Experimental Economics, Springer;Economic Science Association, vol. 9(2), pages 79-101, June.
    14. Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
    15. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-1346, December.
    16. Mikhail I Melnik & James Alm, 2002. "Does a Seller’s eCommerce Reputation Matter? Evidence from eBay Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 337-349, September.
    17. Hubbard, Thomas N, 2002. "How Do Consumers Motivate Experts? Reputational Incentives in an Auto Repair Market," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 437-468, October.
    18. Rafael Rob & Arthur Fishman, 2005. "Is Bigger Better? Customer Base Expansion through Word-of-Mouth Reputation," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1146-1175, October.
    19. Lichtenstein, Donald R & Bloch, Peter H & Black, William C, 1988. "Correlates of Price Acceptability," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 15(2), pages 243-252, September.
    20. Dean Karlan & Jonathan Zinman, 2009. "Observing Unobservables: Identifying Information Asymmetries With a Consumer Credit Field Experiment," Econometrica, Econometric Society, vol. 77(6), pages 1993-2008, November.
    21. Pierre-Andre Chiappori & Bernard Salanie, 2000. "Testing for Asymmetric Information in Insurance Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 56-78, February.
    22. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    23. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    24. repec:bla:econom:v:70:y:2003:i:279:p:385-404 is not listed on IDEAS
    25. Sanjeev Dewan & Vernon Hsu, 2004. "Adverse Selection In Electronic Markets: Evidence From Online Stamp Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 497-516, December.
    26. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    27. Krishnamurthi, Lakshman & Mazumdar, Tridib & Raj, S P, 1992. "Asymmetric Response to Price in Consumer Brand Choice and Purchase Quantity Decisions," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(3), pages 387-400, December.
    28. Daniel Houser & John Wooders, 2006. "Reputation in Auctions: Theory, and Evidence from eBay," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 353-369, June.
    29. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    30. Xiang, Zheng & Gretzel, Ulrike, 2010. "Role of social media in online travel information search," Tourism Management, Elsevier, vol. 31(2), pages 179-188.
    31. Dennis E. Smallwood & John Conlisk, 1979. "Product Quality in Markets Where Consumers are Imperfectly Informed," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(1), pages 1-23.
    32. Ginger Zhe Jin & Phillip Leslie, 2003. "The Effect of Information on Product Quality: Evidence from Restaurant Hygiene Grade Cards," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 409-451.
    33. William P. Rogerson, 1988. "Price Advertising and the Deterioration of Product Quality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(2), pages 215-229.
    34. Nicolau, Juan Luis & Sellers, Ricardo, 2010. "The quality of quality awards: Diminishing information asymmetries in a hotel chain," Journal of Business Research, Elsevier, vol. 63(8), pages 832-839, August.
    35. Henry Kaiser, 1974. "An index of factorial simplicity," Psychometrika, Springer;The Psychometric Society, vol. 39(1), pages 31-36, March.
    36. Alma Cohen & Peter Siegelman, 2010. "Testing for Adverse Selection in Insurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 39-84, March.
    37. Silvia Caserta & Antonio Russo, 2002. "More Means Worse: Asymmetric Information, Spatial Displacement and Sustainable Heritage Tourism," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 26(4), pages 245-260, November.
    38. Thomas N. Hubbard, 1998. "An Empirical Examination of Moral Hazard in the Vehicle Inspection Market," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 406-426, Summer.
    39. Chou, Shin-Yi, 2002. "Asymmetric information, ownership and quality of care: an empirical analysis of nursing homes," Journal of Health Economics, Elsevier, vol. 21(2), pages 293-311, March.
    40. Johannes Hörner, 2002. "Reputation and Competition," American Economic Review, American Economic Association, vol. 92(3), pages 644-663, June.
    41. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
    42. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
    43. J. A. Mirrlees, 1999. "The Theory of Moral Hazard and Unobservable Behaviour: Part I," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 3-21.
    44. Howard P. Marvel & Lixin Ye, 2008. "Trademark Sales, Entry, And The Value Of Reputation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 547-576, May.
    45. Rao, Akshay R & Sieben, Wanda A, 1992. "The Effect of Prior Knowledge on Price Acceptability and the Type of Information Examined," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(2), pages 256-270, September.
    46. Franklin Allen, 1984. "Reputation and Product Quality," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 311-327, Autumn.
    47. Telser, L G, 1980. "A Theory of Self-enforcing Agreements," The Journal of Business, University of Chicago Press, vol. 53(1), pages 27-44, January.
    48. repec:bla:jindec:v:50:y:2002:i:3:p:337-49 is not listed on IDEAS
    49. William P. Rogerson, 1983. "Reputation and Product Quality," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 508-516, Autumn.
    50. Foster, Andrew D & Rosenzweig, Mark R, 1994. "A Test for Moral Hazard in the Labor Market: Contractual Arrangements, Effort, and Health," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 213-227, May.
    51. Joseph E. Stiglitz, 2002. "Information and the Change in the Paradigm in Economics," American Economic Review, American Economic Association, vol. 92(3), pages 460-501, June.
    52. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    53. repec:bla:scandj:v:90:y:1988:i:3:p:383-413 is not listed on IDEAS
    54. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(4), pages 659-679.
    55. Richard J. Arnott & Joseph E. Stiglitz, 1988. "The Basic Analytics of Moral Hazard," NBER Working Papers 2484, National Bureau of Economic Research, Inc.
    56. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
    57. Steven Tadelis, 2002. "The Market for Reputations as an Incentive Mechanism," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 854-882, August.
    58. Amy Finkelstein & Kathleen McGarry, 2006. "Multiple Dimensions of Private Information: Evidence from the Long-Term Care Insurance Market," American Economic Review, American Economic Association, vol. 96(4), pages 938-958, September.
    59. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tsaur, Ruey-Chyn & Chen, Chyoug-Hwa, 2018. "Strategies for cross-border travel supply chains: Gaming chinese group tours to Taiwan," Tourism Management, Elsevier, vol. 64(C), pages 154-169.
    2. Peng-Sheng You & Ming-Hsiang Chen & Ching-Hui (Joan) Su, 2021. "Travel agent’s tour selection and sightseeing bus schedule for group package tour planning," Tourism Economics, , vol. 27(1), pages 220-242, February.
    3. Fan, Daisy X.F. & Hsu, Cathy H.C. & Lin, Bingna, 2020. "Tourists’ experiential value co-creation through online social contacts: Customer-dominant logic perspective," Journal of Business Research, Elsevier, vol. 108(C), pages 163-173.
    4. Shang, Ziye & Pan, Yu, 2024. "Subdivisions and causes of alienated travel experience," Annals of Tourism Research, Elsevier, vol. 105(C).
    5. Akamavi, Raphaël K. & Mohamed, Elsayed & Pellmann, Katharina & Xu, Yue, 2015. "Key determinants of passenger loyalty in the low-cost airline business," Tourism Management, Elsevier, vol. 46(C), pages 528-545.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. W. Bentley MacLeod, 2006. "Reputations, Relationships and the Enforcement of Incomplete Contracts," CESifo Working Paper Series 1730, CESifo.
    2. Chrysanthos Dellarocas, 2003. "The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms," Management Science, INFORMS, vol. 49(10), pages 1407-1424, October.
    3. Jolivet, Grégory & Jullien, Bruno & Postel-Vinay, Fabien, 2016. "Reputation and prices on the e-market: Evidence from a major French platform," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 59-75.
    4. Luís Cabral & Ali Hortacsu, 2004. "The Dynamics of Seller Reputation: Theory and Evidence from eBay," Working Papers 04-05, New York University, Leonard N. Stern School of Business, Department of Economics.
    5. Hortacsu, Ali, 2005. "Trust and Reputation on eBay: Micro and Macro Perspectives," Department of Economics, Working Paper Series qt8vj7d50q, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    6. Vincenzo Scoppa, 2003. "Contratti incompleti ed enforcement endogeno. Una rassegna della letteratura," Economia politica, Società editrice il Mulino, issue 3, pages 391-440.
    7. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, January.
    8. Pierre Fleckinger, 2007. "Collective Reputation and Market Structure: Regulating the Quality vs Quantity Trade-of," Working Papers hal-00243080, HAL.
    9. Judy E. Scott & Dawn G. Gregg & Jae Hoon Choi, 2015. "Lemon complaints: When online auctions go sour," Information Systems Frontiers, Springer, vol. 17(1), pages 177-191, February.
    10. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
    11. Omer Moav & Zvika Neeman, 2004. "Inspection in Markets for Experience Goods," Discussion Paper Series dp349, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    12. Johannes Hörner, 2002. "Reputation and Competition," American Economic Review, American Economic Association, vol. 92(3), pages 644-663, June.
    13. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    14. Arthur Fishman & Rafael Rob, 2002. "Is Bigger Better? Investing in Reputation," Penn CARESS Working Papers 40893328535d25cf3e69a981a, Penn Economics Department.
    15. Bedsworth, Fredrick & Neal, Daniel R. & Portillo, Javier E. & Willardsen, Kevin, 2021. "Asymmetric information and insurance: An experimental approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 92(C).
    16. Eckardt, Martina, 2007. "Does signaling work in markets for information services? An empirical investigation for insurance intermediaries in Germany," Thuenen-Series of Applied Economic Theory 77, University of Rostock, Institute of Economics.
    17. Howard P. Marvel & Lixin Ye, 2008. "Trademark Sales, Entry, And The Value Of Reputation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 547-576, May.
    18. Paul A. Pavlou & Angelika Dimoka, 2006. "The Nature and Role of Feedback Text Comments in Online Marketplaces: Implications for Trust Building, Price Premiums, and Seller Differentiation," Information Systems Research, INFORMS, vol. 17(4), pages 392-414, December.
    19. Luís Almeida Costa & Luís Vasconcelos, 2010. "Share the Fame or Share the Blame? The Reputational Implications of Partnerships," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 259-301, June.
    20. Dionne, Georges, 2012. "The empirical measure of information problems with emphasis on insurance fraud and dynamic data," Working Papers 12-10, HEC Montreal, Canada Research Chair in Risk Management.
    21. K. Chau & S. Wong & C. Yiu, 2007. "Housing Quality in the Forward Contracts Market," The Journal of Real Estate Finance and Economics, Springer, vol. 34(3), pages 313-325, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:touman:v:38:y:2013:i:c:p:43-54. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/tourism-management .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.