<scp>Market Segmentation: The Role of Opaque Travel Agencies</scp>

Shapiro, Dmitry; Shi, Xianwen

doi:10.1111/j.1530-9134.2008.00196.x

Cited by 77 publications

(23 citation statements)

References 21 publications

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“…APJML 35,4 2.2 Opaque selling in a competitive market This second stream studies opaque selling involving competing service providers. For example, Shapiro and Shi (2008) investigated the impact of an opaque intermediary in the travel industry, showing that opaque selling enables competing service providers to price discriminate, and this intensifies competition. Jerath et al (2010) compared opaque selling with last-minute selling, examining the optimality of opaque selling for two competitive service providers.…”

Section: Opaque Selling In a Monopolist Settingmentioning

confidence: 99%

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Opaque selling vs traditional selling: optimal decisions for service providers in a competitive market

Chen

Yang

Shan

et al. 2022

APJML

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PurposeOpaque selling has become popular among service providers in recent years. Although many researchers have investigated the optimality of opaque selling for service providers focusing on heterogeneous consumers, one question remaining unexplored is how the service providers’ optimal decisions are impacted by competitive intensity in a heterogeneous market. This paper aims to determine the conditions under which opaque selling is optimal for competing service providers.Design/methodology/approachThe paper takes a Hotelling model to characterize the competition between two service providers. The authors also consider the interaction between the service providers and intermediary. Service providers act as game leaders and determine whether they should cooperate with the intermediary to introduce the opaque service.FindingsThe authors find that two competing service providers do not always benefit from opaque selling in a heterogeneous market consisting of leisure and business consumers, and the competitive intensity plays a significant role in the service providers’ decision optimization. Opaque selling allows service providers to acquire more profit in a highly competitive market or when the market contains a large proportion of leisure consumers. Otherwise, it is optimal for service providers without introducing the opaque selling.Practical implicationsThe paper examines the optimality of opaque selling for competing service providers, and provides the suggestions to optimize the service providers’ decisions.Originality/valueThe paper investigates how the service providers’ optimal decisions are impacted by competitive intensity, considering the interaction between the service providers and intermediary.

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Section: Opaque Selling In a Monopolist Settingmentioning

confidence: 99%

“…This second stream studies opaque selling involving competing service providers. For example, Shapiro and Shi (2008) investigated the impact of an opaque intermediary in the travel industry, showing that opaque selling enables competing service providers to price discriminate, and this intensifies competition. Jerath et al.…”

Section: Literature Reviewmentioning

confidence: 99%

Opaque selling vs traditional selling: optimal decisions for service providers in a competitive market

Chen

Yang

Shan

et al. 2022

APJML

View full text Add to dashboard Cite

show abstract

“…By incorporating the issue of competition in a deterministic model, Fay (2008) shows that opaque selling can reduce industry profits unless there is significant firm loyalty. When customers have different firm preferences, Shapiro and Shi (2008) show that opaque selling can improve industry profits because the firms can set different prices according to customer preferences. By considering a two-period model in which a firm sells through a transparent channel in the first period and it has the option to sell through an opaque channel in the second period, Jerath et al (2009Jerath et al ( , 2010 establish the conditions under which it is optimal for the firm to switch to selling in the opaque channel in the second period.…”

Section: Literature Reviewmentioning

confidence: 99%

Mitigating the Double‐Blind Effect in Opaque Selling: Inventory and Information

Tang

2020

Production and Operations Management

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O paque selling is a marketing strategy under which firms sell end-of-the-season inventory of different products as a single opaque good and customers find out the specific products they actually get only after they have made the purchase. Opaque selling entails a "double-blind" process: customers do not know the inventory level of each product, and the seller does not know their product preferences. This double-blind process can result in customer dissatisfaction when customers do not receive the products they were hoping for, and the seller is unable to allocate the right product to the right customer. To reduce customer dissatisfaction arising from the double-blind process, we examine whether the seller should: (i) reveal its inventory information to customers, (ii) solicit each customer's product preference, or (iii) charge customers a higher price for removing product uncertainty; that is, sell specific goods and opaque good at the same time. To examine these issues, we analyze a model in which a firm sells two products as a single opaque good. We show that revealing inventory information or soliciting customer preferences results in higher customer surplus, but lower revenue for the firm. We then consider the case when the firm sells specific goods and opaque good at the same time. We show that relative to the case of selling only the opaque good, the firm's revenue is strictly higher and customer surplus may be higher or lower. Specifically, when the price of specific goods is product dependent, selling specific goods and opaque good at the same time benefits the firm the most when the inventory levels of the two products are relatively balanced and their valuations are strongly skewed. When the price of specific goods is product independent, however, the firm gains the most when the inventory levels are relatively balanced but their valuations are not too strongly skewed. We also identify conditions under which the customer surplus is higher.

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“…Allen and Jagtiani (1997) differentiate between depository institutions, insurance companies, mutual funds, and other financial firms and find evidence of market segmentation in both market risk levels and market risk premiums. Shapiro and Shi (2008) investigate the role of discount travel agencies, such as Priceline and Hotwire, in the market segmentation of the hotel and airline industries and find support for an inverse relationship between the quantity and price for market risk. Liu et al (2010) discuss the multi-criterion nature of market segmentation and develops a new mathematical model that addresses this issue.…”

Section: Introductionmentioning

confidence: 99%

Industry Segmentation Under Environmental Pressure: An Optimal Approach

Dai

Liu

Liang

2014

Technological and Economic Development of Economy

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Based on the Solow growth model, this paper builds a combinatorial model for economic growth under environmental pressure. Using the model, the optimal number of industries in an economy can be computed, and the “optimal number” can be regarded as a criterion for decision making concerning industry segmentation. This paper presents a critical value of the number of industries in an economy, which determines the economic output to grow (or not) after industry segmentation. The findings include the following: (1) technological progress and innovative growth cause an industry segmentation, and (2) industry segmentation is the primary approach to sustaining economic growth under environmental pressure.

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Market Segmentation: The Role of Opaque Travel Agencies

Abstract: This paper investigates the role of discount travel agencies such as Priceline and

Cited by 77 publications

References 21 publications

Opaque selling vs traditional selling: optimal decisions for service providers in a competitive market

Opaque selling vs traditional selling: optimal decisions for service providers in a competitive market

Mitigating the Double‐Blind Effect in Opaque Selling: Inventory and Information

Industry Segmentation Under Environmental Pressure: An Optimal Approach

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