Decision Between PP And NYOP Opaque Selling Modes In Hotel Industry

The competing service providers have been widely conducting opaque sales by cooperating with a intermediary such as Priceline and Hotwire,for increasing realizing price discrimination,and creating a new channel to customers.Recent advances on opaque sales have focused on homogeneous customers,with considering the revenue sharing mechanism for heterogeneous customers remaining a crucial missing chapter.This study considers two competing service providers collaborate with a intermediary in a heterogeneous market with leisure and business customers.The contracting strategies are derived by comparing the two modes' profits.We find that the decisions of service providers relates to two factors: the market structure and the revenue sharing mechanisms.In a business customer dominating market,service providers may collaborate with the intermediary.Whereas,in a leisure customer dominating market,service providers may not collaborate with the intermediary.In both situations,the service providers should balance the trade-off between the profit getting from the intermediary and the potential profit losing from the opaque sales.Then we investigates whether the platform should use opaque sales and what kind of opaque sales mode it should apply.We do that by comparing traditional,PP and NYOP modes.There are two kinds of opaque channels,namely,PP and NYOP channels.The customer can observe the price in posted price channel,by contrast,he needs to bid for the service in name-your-own-price channel.There are two kinds of customers,leisure and business customers.Leisure customers have a lower reservation value compared to that of business customers.We prove that the strength of opaque modes over traditional mode comes from that the opaque sales can help the platform realize price discrimination and customer segmentation.In particular,the increase of the business customers' valuation and proportion and the service's opacity as well as the leisure customers' bidding price can facilitate the platform choose the NYOP mode.When comparing PP with NYOP mode,we show that the reason why NYOP mode performs better than PP mode comes from relative high bidding price of leisure customers.