A Study On Excessive Competition In China’s Travel Agency Market

With the decentralization of tourism sales right in1984, the scale of China’stravel agency industry is growing stronger, while the promotion role of the travelagency industry to tourism development gradually appears. But at the same time, thedevelopment of travel agency industry itself has got into the plight gradually in China,such as a downward trend in industrial concentration, the oligopolistic type of themarket structure having been evolved into competitive one, high prevalence ofexcessive competition in the market, and the average profit margin and touristssatisfaction having declined year by year. According to the view of the Harvard school,the market structure determines the market conduct, and the market conductdetermines the market performance. Travel agency market performance is mainlyaffected by the travel conduct, while the most influencing factor on it is the degree ofvicious price competition. Promoting the efficiency of the tourism industry is apriority direction of the transformation and development of China’s tourism industry.As one of the important pillar of China’s tourism industry, the market performance ofthe travel agency industry will directly influence its overall efficiency. Therefore, thestudy of excessive competition in China’s travel agency market has importanttheoretical and realistic significance.Based on former excessive competition theory and the actual situation of ourcountry’s travel agency market, this thesis makes an analysis of phenomenon ofexcessive competition which appears in our country’s travel agency market byselecting the Bertrand model of an asymmetric cost. Then, from cracking the thoughtof "Bertrand’s paradox", this thesis tries the assumptions by weakening model tomake China’s travel agency industry get rid of the current status of excessivecompetition. Basically there is no production capacity constraints of the travel agencyindustry because it requires few fixed facilities and their production ability is aboutthe number of tourists. Finally, this thesis only discusses the methods of workablecompetition from the aspects such as product differentiation, repeated game, perfectinformation and so on.Conclusion is obtained as follows:(1) The excessive competition of China’stravel agency market makes the whole travel agency industry poor performance and reduces the whole travel agency industry’s profitability.(2) One of the main reasonsfor excessive price competition is the excess number of travelagency.(3)If travel agencies can make product into heterogeneity, it may reduce exces-sive price competition. But due to lack of property protection and the low cost of imit-ation, travel agencies don’t have a mind to make efforts on innovation.In addition, to-urists preference for the product quality also needs to be considered.(4) By reducingthe extent of the tourist products on the market whose information is not perfect,quality cash deposit system improves the market equilibrium and efficiency.(5) It isgood to strengthen the supervision of regulators and investigate and punish dereliction.Although it cannot make regulators more accountable in the long term, it caneffectively inhibit the travel agency’s behavior of selling inferior products.