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Bargaining Power in Tourist Shopping
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Bargaining behavior is popular when tourists shop, with bargaining power representing the surplus sellers or buyers obtain after price negotiations. This article applies a two-tier stochastic frontier analysis to estimate sellers’ and buyers’ (i.e., tourists’) surplus terms as a measure of their respective bargaining power. Using large-scale data on shopping behavior obtained from a domestic tourist survey conducted in Nanjing, China, between 2005 and 2010, our empirical results indicate that in general, tourists exhibit stronger bargaining power than sellers. Additionally, tourists’ net surplus, as a measure of relative bargaining power, is heavily informed by their tripographic and sociodemographic characteristics, with the former being more influential. In particular, tourists traveling with companions and obtaining travel information from friends and mass media tend to have stronger-than- average bargaining power.
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... Besides the above theoretical developments of the 2TSF, there has been an increasing number of empirical applications of 2TSF, including those in the labor market (Polachek and Yoon 1987;Groot and Oosterbeek 1994;Polachek and Yoon 1996;Sharif and Dar 2007;Murphy and Strobl 2008;Kumbhakar and Parmeter 2009;Blanco 2017;Das and Polachek 2017), housing market (Kumbhakar and Parmeter 2010;Pu et al. 2022), energy market (Liu et al. 2019), health market (Tomini et al. 2012;Gaynor and Polachek 1994;Chawla 2002), water rights market (Xu et al. 2021), auctions market (Ferona and Tsionas 2012;Verteramo Chiu et al. 2022), wine market (Fried and Tauer 2019), and other related markets (Wang 2018;Zhang et al. 2018;Hu and Pei 2020;Papadopoulos 2021a;etc). ...
Bayesian methods have been well studied in one-tiered stochastic frontier literature, but as of yet have not been proposed in a two-tiered stochastic frontier (2TSF) setting. Recently, 2TSF models have drawn much attention, observed by increased theoretical extensions and empirical applications. This paper fills the gap in the literature by presenting a Bayesian approach to estimating 2TSF models, with and without efficiency (or bargaining power) determinants. Posterior distributions for the parameters and efficiencies for two bargaining parties are derived. Finally, we use both maximum likelihood estimation and Bayesian methods to analyze bargaining power in Major League Baseball salary arbitration negotiations. We find that players who generate their value by hitting for power have more bargaining power, while players who generate their value by having high on-base abilities have less bargaining power. This result is consistent with pre-Moneyball free agent market valuations for these skills.
JEL Classification: C1, C3, Z22
... Extensive literature attempts to delineate the antecedents and outcomes of tourist shopping behavior. Most studies focus on its financial impact (Chang, Yang, and Yu 2006;Su et al. 2018a), driving motivation and values (Choi, Law, and Heo 2018;Correia, Kozak, and Kim 2018), effect on tourist satisfaction and loyalty (Sirakaya-Turk, Ekinci, and Martin 2015;Zhang et al. 2018), and shopping patterns (Hu and Yu 2007;Meng et al. 2019). While these studies have substantially contributed to the literature, the understanding of how product involvement influences the extent of tourist shopping behavior is scarce. ...
This study investigates how tourists' involvement with certain products that originate in a destination country influences their expenditures on these products during their trips to the country. Based on the extant literature, we propose a model that accounts for the mediating mechanisms of place attachment, overall satisfaction, and visit frequency. The relationships between the model's variables are empirically examined using data collected from 1,314 Chinese tourists who had travel experiences in Japan and varying levels of involvement with Japanese cosmetic products. Contrary to our expectations, the result for the direct effect of product involvement on purchase amount is negative and significant. However, the indirect effects of product involvement through place attachment and overall satisfaction are both significantly positive and appear to surpass the negativity of the direct effect. Thus, this study confirms that tourists' involvement with a product will cause them to spend more money on the product. The implications for local retailers and manufacturers to increase revenue from inbound tourists are discussed.
... market, and generally find employers with the bargaining power. Other applications include tourist bargaining (Zhang et al., 2017) and a real estate application by Xu et al. (2016). A recent application exploring correct pricing of U.S. Riesling wines was completed by Fried and Tauer (2019). ...
... We also mention applications in psychometrics (Groot & van den Brink 2007;Poggi 2010). 1 One of the most fruitful extensions of the model has been its application in buy-sell/bilateral bargaining transactions, where, together with incomplete and asymmetric information, the effect of the relative bargaining power of the parties on the outcome is modeled and measured. This strand of literature started with Kumbhakar and Parmeter (2009) and has seen applications to very different situations like the biotechnology market (Kinukawa & Motohashi 2010, 2016, bilateral aid between countries (Wang 2016(Wang , 2018, Water rights (Xu et al. 2020), the farmland market (Curtiss et al. 2021;Seifert et al. 2015), but also tourist shopping (Zhang et al. 2018). ...
The two-tier stochastic frontier model has seen widespread application across a range of social science domains. It is particularly useful in examining bilateral exchanges where unobserved side-specific information exists on both sides of the transaction. These buyer and seller specific informational aspects offer opportunities to extract surplus from the other side of the market, in combination also with uneven relative bargaining power. Currently, this model is hindered by the fact that identification and estimation relies on the potentially restrictive assumption that these factors are statistically independent. We present three different models for empirical application that allow for varying degrees of dependence across these latent informational/bargaining factors.
Information asymmetry in different service products is lacking research. Tourism e-commerce as a dynamic financial market driven by advanced information technology deepens the concern for asymmetry brought to hotel consumers. COVID-19 provides a natural intervention on market asymmetry in the hotel price information, which effects are worth evaluating. This study therefore evaluates the degree of information asymmetry in terms of the lodging price of international tourist hotels (ITHs). Through applying the concept of stochastic frontier approach (SFA), this study estimates the degree of information asymmetry and the inefficiencies. The estimation results indicate that the hotel location, traveler type, operation type may cause different information asymmetry. By comparing with the asymmetry before the pandemic, it is found that the asymmetry in lodging price information decreased since the outbreak of the COVID-19 pandemic. Among the six regions studied, the mean range of information equity degree increased from the original 0.634-0.832 to 0.7633-0.866. It indicates that the outbreak of COVID-19 changed the structure of the consumer groups in hotel operations and then affect the hotelier's pricing strategy.
Bargaining power of buyers is a very pertinent component to understand the competition in any industry to make effective strategic decisions. This study is an attempt to analyze the bargaining power of buyers in the Assam silk industry which holds a significant position not only in India but across the world because of its unique and quality products. Data were collected from 80 number of Assam silk sellers from Sualkuchi area of the state of Assam in India by focus group interview method through open ended unstructured schedule. The content analysis method is used for the study using Porter’s five forces framework. The findings indicates that there is existence of high bargaining power of buyers as there is availability of numerous silk substitutes at cheap price easily available at silk market of Assam with less distinguishing features, designs, texture and colours. Moreover, it is found that there is less or no switching cost for Assam silk customers and easy backward integration. As a result, the Assam silk industry is becoming less profitable and attractive for these customers who are highly price sensitive. In this regard, the Assam silk industry stakeholders and policy makers should undertake defensive strategies to mitigate the bargaining issues and offer quality products & services at lower prices to customers to sustain this age old industry.
The past two decades has seen a flourishing of research on the characteristics and behaviours of Chinese tourists. Much early research viewed this phenomenon through an essentialist cultural lens; presuming a relatively static and homogeneous market. Recent scholarship has criticised this approach, as risking creating or reinforcing stereotypes of tourists, and overlooking other valid explanations for behaviour. Thus, there is a call to focus on cultural complexity, recognising that culture evolves and responds to changing contexts and situations. Drawing insights from the Sri Lanka host
service providers in the retail shopping setting, this study explores the perspectives and responses of host service providers to the characteristics and behaviour of the Chinese tourist market with whom they interact. Applying a dynamic and context-specific perspective of culture, the study reveals an evolving and negotiated context in which
retail service providers respond to the Chinese market, and adapt their strategies, as the latter also alter their behaviour in a dynamic context of host-tourist interactions.
Stochastic frontier analysis (SFA) focuses mostly on measuring and analyzing matters of efficiency in production and in cost decisions, based on the conceptual and modeling device of a frontier, a boundary beyond which a firm can find itself only by chance, literally. But the existence of frontiers in human activity is a consequence of physical and of economic scarcity: the fact that resources are always less than what we would desire to have available in order to fulfill whatever needs and wants we are able to imagine (or cannot ignore no matter how hard we try). Scarcity creates restrictions, constraints, bounds, boundaries... frontiers. Therefore “frontier modeling” is not constrained to be a specialized tool for efficiency and productivity analysis but can be used as a general methodological approach to formulate and then study economic phenomena (and not only).
Based on my PhD, this article reviews all things Two-tier stochastic frontier model (2TSF). It is included in the collection Parmeter, C. F., & Sickles, R. C. (2020), Advances in Efficiency and Productivity Analysis. Springer. https://link.springer.com/book/10.1007/978-3-030-47106-4
We specify a two-tier stochastic frontier model to estimate a price equation for U.S. Rieslings and determine overpricing and underpricing of specific wines. The data is for 2000–2016. Using tasting score and tasting score squared as sole independent variables, we found evidence of overpricing and underpricing of wines. When additional location variables were entered, empirical estimates for this two-tier model were infeasible, suggesting that both underpricing and overpricing did not occur simultaneously in this market. Separate one-sided stochastic frontier models were then specified and estimated to test for either under or overpricing in this market. Results showed that overpricing exists and not underpricing, but the extent of overpricing is minor, suggesting that wineries do an efficient job pricing their wines, given tasting scores, conditional on regional location premiums or discounts. We also investigated the effect of scale on pricing for a smaller set of wineries. (JEL Classifications: C4, D4, Q1)
Studies have examined tourism shopping in various aspects, but scarce research has specifically focused on impulsive shopping behavior of tourists, which is of particular relevance in the tourism settings. This study addresses this paucity by examining factors influencing impulsive tourist shopping urge and purchase from the aspects of tourist internal attribute, social influence, and product attribute. By examining Chinese long‐haul tourists traveled outside Asia, the empirical results suggest that (a) impulsive trait and hedonic and materialistic tendency of tourists lead to impulsive urge and engagement in actual impulsive buying; (b) shopping companion/social influences from family and relatives, peers (friends/colleagues), and shop assistants also affect the impulsive shopping urge; (c) product brand variety shows significant effect on impulsive urge, whereas the influence of product price is insignificant; and (d) traveling with a shopping list or not moderates the relationship between impulsive urge and actual impulsive purchase. The study advances the theoretical understanding of tourist impulsive shopping behavior and provides marketing/managerial insights into Chinese overseas tourism market.
Although productivity spillovers have long been recognized to be a major benefit of foreign direct investment (FDI), such spillovers have not yet been systematically studied in the context of the hotel industry. This paper investigates hotel-related FDI spillover effects as well as moderating factors (geographic region, star rating classification, ownership type and foreign capital origin) in China. Evidence from province-level panel data reveals the existence and significance of intra-industry spillovers from foreign to domestic hotels in China, although the nature and magnitude vary based on different moderating factors. Domestic hotels in eastern and western China and those with alliance and limited liability ownership structures benefit significantly from productivity spillovers. Foreign-invested three-star hotels transfer a significant amount of positive productivity, whereas domestic three- and five-star hotels benefit the most from productivity spillovers. Moreover, foreign-invested hotels from Hong Kong, Macau, and Taiwan (HMT) and non-HMT countries generate positive spillovers of similar magnitudes.
Conceptualising development assistance as the outcome of aid-for-policy transactions between donors and recipients brings the effect of bargaining power on aid allocation immediately to light. This study provides a two-tiered stochastic frontier analysis that is able to integrate the enquiry into bargaining power with the more traditional literature on aid determinants. By examining the bilateral aid commitment of 23 Development Assistance Committee members of the OECD during the period from 1992 to 2011, I find that donor countries have more bargaining power in surplus division than recipient countries. More specifically, donors have, on average, extracted policy concessions from recipients for about 14 per cent less than their baseline value. Rich variations in the distribution of bargaining power across countries and within individual aid determinants are also analysed and discussed.
General models of tourist decision making have been developed to theorize tourist decision processes. These models have been based on the premise that tourists are rational decision makers and utility maximizers. Further, these models have been operationalized through input–output models to measure preferences and behavioral intentions. The extent that they remain viable to explain and predict tourist behavior as tourism markets mature however is uncertain. This review article critiques these approaches and proposes a new general model based on dual system theory to account for different types of choice strategies, the constructive nature of preferences, and to recognize the individual and contextual factors that influence choice processes. The article argues that a general tourist choice model should integrate the psychological processes that determine choice strategies, or heuristics, and consider choice context. These include individual differences, task-related factors, and principles determining system engagement. Future research and practical implications are outlined.
Testing economic propositions in laboratory experiments has proven a very fruitful research endeavor in recent years. This volume brings together the major contributors to experimental economics. The papers present their views on the way experiments should be done, on the power and limitations of the techniques, and on the areas in which experimentation could contribute substantially to our understanding of economic behavior. This book distills the main lessons from great experience in experimental work. It will be essential reading for all who wish to follow experimental work or who wish to do such work themselves.
The authors advance a theoretical model of consumer negotiated pricing, using an orientation perspective. An overview of traditional participant interchange (transaction bound) negotiation research is provided, and a theoretical framework of pretransaction conditions that contribute to orienting consumers prior to participant interchange is developed. Finally, several managerial, public policy, and research implications derived from the orientation perspective are discussed.
This paper offers new empirical evidence that can be used to analyse the structure of the market in which tour operators compete. The authors examine the prices of package holidays to the Balearic Islands, one of the Mediterranean's leading tourist destinations, offered by a sample of German and UK tour operators. The hedonic price method is used, expressing package holiday prices in terms of the characteristics of the packages. The model also incorporates information that facilitates assessment of certain aspects of the market: in particular, the market power of various tour operators and the influence of agreements with hotel chains. The paper concludes that tour operators' strategies and price structures are characteristic of an oligopolistic market.
Laden with assorted emotional factors, dark tourism behaviors are heavily influenced by emotion-related factors, such as intrapersonal constraints. By deploying a survey of tourists visiting the Memorial of the Victims of the Nanjing Massacre, which lies on the darkest edges of the dark tourism spectrum, this study probes how well one's intrapersonal constraints and past experiences relate to one's revisit intention. Results indicate that there are four sub-dimensions in intrapersonal constraints, namely culture, emotion, escape, and incuriousness. The cognitive experiences have significantly positive effects on the revisit intention either through direct effects or via the mediating variables of intrapersonal constraints, while intrapersonal constraints play an indirect-only mediating role in the relationship between affective experiences and revisit intentions. Theoretical and practical contributions of the study findings are discussed within the realm of dark tourism.
The impact of vacations on tourists’ shopping behavior has received significant research attention, but there is a dearth of literature on bargaining behavior in the settings of tourism and hospitality. The purpose of this study is to investigate the bargaining behavior of British tourists visiting Turkey. The study employs an open-ended survey. Using a content analysis, the study suggests that most tourists use bargaining to seek value for money, and that they are more likely to bargain while on vacation than when at home. This study contributes to the body of literature covering tourist experiences when on vacation abroad, and proposes several practical implications.
This paper provides a comprehensive econometric analysis of the expenditures of international visitors to the Western fjord-region of Norway. The data come from an intercept survey conducted on randomly elicited summer visitors at central tourism locations in the region. Estimations are performed for total group expenditures and personal tourist expenditures. To adjust for potential sampling bias, both un-weighted and weighted regressions techniques are employed. The results identify elasticity measures with respect to length of stay, travel party size, and income, and uncover several other statistically significant and economically important determinants of expenditures. As a novel exploratory feature, the paper also analyzes expenditure shares for different categories of tourism goods and services.