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Open-Loop And Closed-Loop Models Of Dynamic Oligopoly In The Cruise Line Industry

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  • BYUNG-WOOK WIE

    (School of Travel Industry Management, University of Hawaii, 2560 Campus Road, Honolulu, Hawaii 96822, USA)

Abstract

In this paper, the competition of dynamic oligopoly in the cruise line industry is modeled as anN-person nonzero-sum noncooperative dynamic game where a finite number of cruise lines compete to maximize their profits over a fixed planning horizon. The noncooperative Nash equilibrium capacity investment strategies of cruise lines are theoretically analyzed under the open-loop and closed-loop information structures. The optimality conditions for open-loop and closed-loop Nash equilibrium solutions are derived using a Pontryagin-type maximum principle and given economic interpretations so as to demonstrate the differences between the open-loop and closed-loop Nash equilibrium solutions. The dynamic oligopolistic competition of three cruise lines in a hypothetical setting is numerically analyzed by using the iterative algorithms for open-loop and closed-loop models. Numerical results provide a number of important managerial guidelines for cruise capacity investment decisions. The paper concludes with a discussion on future research directions.

Suggested Citation

  • Byung-Wook Wie, 2004. "Open-Loop And Closed-Loop Models Of Dynamic Oligopoly In The Cruise Line Industry," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 21(04), pages 517-541.
    • Handle: RePEc:wsi:apjorx:v:21:y:2004:i:04:n:s0217595904000187
    DOI: 10.1142/S0217595904000187
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    Cited by:

    1. Lee, Scott & Ramdeen, Collin, 2013. "Cruise ship itineraries and occupancy rates," Tourism Management, Elsevier, vol. 34(C), pages 236-237.
    2. Chenchen Yang & Junfeng Dong & Jingjing Hao, 2019. "Cooperation Contracts Between Small and Major Scenic Spots in Peak Seasons," SAGE Open, , vol. 9(3), pages 21582440198, July.
    3. Scott Lee & Sherie Brezina, 2016. "Cruise line efficiency," Tourism Economics, , vol. 22(5), pages 1075-1086, October.

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