Optimal Emission Reduction and Pricing in the Tourism Supply Chain Considering Different Market Structures and Word-of-Mouth Effect

In the context of carbon tax policy and word-of-mouth, local operators and tour operators in the tourism supply chain need to determine optimal wholesale price, carbon reduction level, and retail price of tour packages strategies. To address these decision-making issues, while considering the word-of-mouth effect, our paper considers a local operator determining wholesale price and carbon reduction level of the tour package and a tour operator determining retail price of the tour package. According to different bargaining powers, we study three scenarios: the local operator leading Stackelberg (LL), the tour operator leading Stackelberg (TL), and the static Nash game (NG). We develop three theoretical models and present some insights. We find that tourist’s sensitivity to word-of-mouth has positive (negative) impacts on optimal wholesale price, carbon reduction level, retail price, demand, and profits if the impact of word-of-mouth is positive (negative), while the impact of word-of-mouth is always having positive impacts on optimal decisions, demand, and profits. Interestingly, the NG market structure contributes the most environmentally-friendly products but mostly hurts the environment. The local operator under LL can obtain the largest profit, which is even larger than the profit of the tour operator, while the tour operator under NG and TL can obtain more profit than the local operator.