Pricing, environmental governance efficiency, and channel coordination in a socially responsible tourism supply chain

• Author: Yunzhi Liu,Zhi‐Ping Fan,Tiaojun Xiao,Xuan Zhao
• Date: 01 May 2019
• Published date: 01 May 2019
• DOI: http://doi.org/10.1111/itor.12489

Intl. Trans. in Op. Res. 26 (2019) 1025–1051

DOI: 10.1111/itor.12489

INTERNATIONAL

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IN OPERATIONAL

RESEARCH

Pricing, environmental governance efficiency, and channel

coordination in a socially responsible tourism supply chain

Yunzhi Liua,b , Tiaojun Xiaoa,c , Zhi-Ping Fanb,∗and Xuan Zhaod

aSchool of Management and Engineering, Nanjing University, Nanjing, China

bSchool of Business Administration, Northeastern University,Shenyang, China

cInstitute of Game Behavior and Operations Management, Nanjing University of Finance and Economics, Nanjing, China

dOperations and Decision Sciences, Lazaridis School of Business and Economics, Wilfrid Laurier University, Waterloo

ON, Canada

E-mail: yunzhi_liu@126.com [Liu]; xiaotj@nju.edu.cn [Xiao]; zpfan@mail.neu.edu.cn [Fan]; xzhao@wlu.ca [Zhao]

Received 7 November2016; received in revised form 9 September 2017; accepted 25 October 2017

Abstract

We investigate the pricing and environmental governance efficiency decisions and channel coordination of

a dyadic tourism supply chain with corporate social responsibility. We consider two cases: only the theme

park exhibits (environmental) social responsibility; and both theme park and tour operator exhibit social

responsibility. For each case, we design a coordination mechanism. In the first case, we find that (a) if the

environmentalgovernance investment is relativelyinexpensive, then the retail price,environmental governance

efficiency, and sale quantity may simultaneously increase with the theme park’s environmental responsibility

(extra investment on the treatment of ungoverned environmental damage) under the centralized system; (b)

it is more likely to achieve a win-win outcome if the theme park cares more about the environment when

the channel is coordinated; (c) the theme park’s environmental responsibility enables itself to gain more

coordination benefit when its negotiation power is relatively high. In the second case, we find that (a) the

environmental governance efficiency or sale quantity increases with the tour operator’s social responsibility;

(b) both members’ profits may increase with the tour operator’s social responsibility.

Keywords:supply chain management; corporate social responsibility; tourism supply chain; channel coordination; game

theory

1. Introduction

Tourism has evolved and modernized considerably and become one of the largest industries in the

world. While tourism contributes to employment and economic development, its development can

generate negative impacts on the social and natural environment (Manente et al., 2014). With the

∗Corresponding author.

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International Transactionsin Operational Research C

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1026 Y. Liu et al. / Intl. Trans. in Op. Res.26 (2019) 1025–1051

international community’s widespread concern about the serious effects of mass tourism, tourism

firms are forced to look for a more responsible way of development. Corporate social responsibility

(CSR) is usually defined as a firm behavior that indicates a “responsible attitude or approach” to

business in terms of social and environmental goals (Goering, 2012). CSR is becoming increasingly

important in the tourism sector. In recent years, the merits of CSR have been promoted by many

tourism businesses (Coles et al., 2013). Many tour destinations or operators pay more attention

to environmental governance or the improvement of environmental performance; and stakeholder

issues have been addressed in a variety of ways. For instance, nearly 30% of the tourism sector

adopted recycling practices in their business, and 28% of them banned smoking in their working

spaces in Brunei Darussalam (Ahmad, 2014); Hilton developed environmental management initia-

tives such as its highly successful scheme We Car e! which is held up as an industry-wide best practice

(Bohdanowicz et al., 2011); three European tour operators (the German a&e erlebnis:reisen,the

French Atalante, and the Dutch Natuurreizen) introduced socially responsible policies and actions

such as flexible working hours, training courses, and support for choosing the best holiday solutions

for both employees and clients (Manente et al., 2014). To enhance system efficiency, some contracts

should be designed to coordinate tourism supply chains (Zhang et al., 2009). This illustrates the

relevance of our topic of sustainable development of tourism sector, which involves making price

and environmental governance efficiency decisions and resolving the channel conflict in a socially

responsible tourism supply chain.

One main focus on tourism CSR is environmentalgovernance. It is important for the tourism des-

tination to consider its environmental impacts because the tour products mainly rely on the appeal

of attractive natural resources, for example, pleasant climate, clean waters, and diversified animals

and plants. Through consulting websites, annual reports, and CSR reports of the top three Orlando

theme parks (Walt Disney World, Universal Orlando, and SeaWorld Parks and Entertainment),

Holcomb et al. (2010) point out that they indeed conduct CSR activities in the environmental

governance. We represent a tourism destination’s environmental responsibility through the cost

incurred by the treatment of ungoverned environmental damage. Another important area in the

tourism CSR literature is stakeholder engagement (Coles et al., 2013). Since the benefit of tour

operator is easily influenced by its stakeholders such as customers, it is important for the tour

operator to maintain a well relationship with its stakeholders. In reality, numerous TUI (Europe’s

largest tour operator) subsidiaries established their socially responsible policies or corporate guide-

lines towards stakeholders(Sigala, 2008). And these policies or guidelines often emphasiz e ensuring

consumers’ satisfaction (e.g., by giving the proper price of a package tour). We represent a tour

operator’s social responsibility through its pricing behavior: the tour operator takes the consumer

surplus of its stakeholders into consideration when deciding the price. Moreover, as a leading brand

tourism destination, the theme park should engage in some CSR activities and has a responsibility

to conduct or impel the tour operator to exhibit CSR. Thus, we will first consider the case where

only the theme park exhibits CSR, and further take into account the more general case where both

theme park and tour operator exhibit CSR. In general, the CSR channel member in a tourism

supply chain needs to make a trade-off between profit and CSR.

The decentralization of a channel structure is commonly understood to decrease the supply

chain efficiency due to the double marginalizationeffect (Spengler, 1950). The tourism supply chain

members face the question of how to make price and environmental governance efficiency decisions

in order to obtain higher profits and at the same time exhibit higher CSR. Since the extantliterature

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2017 The Authors.

International Transactionsin Operational Research C

2017 International Federation ofOperational Research Societies