Pricing strategies of tour operator and online travel agency based on cooperation to achieve O2O model

This paper studies the optimal pricing strategies of a tour operator (TO) and an online travel agency (OTA) when they achieve the O2O model through online sale and offline service cooperation. By constructing a competition model, cooperation conditions, pricing strategies and revenues are analyzed and compared in the Stackelberg and Bertrand game. Results indicate that service level, unit sale commission, service cost coefficient and unit service compensation coefficient have different influences on the TO's and OTA's pricing decisions. When the unit sale commission is greater than the threshold, the TO's and OTA's pricing in the Bertrand game are higher than in the Stackelberg game. Being a leader is the dominant strategy for the TO. In addition, the revenues of TO and OTA in sale and service cooperation are analyzed by numerical examples and some suggestions for establishing cooperation contract are provided.