Quality deterioration in package tours: The interplay of asymmetric information and reputation

Asymmetric information in the tourism industry has been regarded as a fundamental cause of quality deterioration of travel services. This study aims to explain such quality deterioration by modeling the interplay of asymmetric information and reputation in package tours. This model is composed of eight hypotheses which regard asymmetric information of product knowledge and effort as a cause on the one hand and tour operatorsʹ reputation as a mediator in alleviating quality deterioration on the other. By applying this model to Chinaʹs outbound tourism market with a cross-sectional survey from December 2010 to June 2011, six hypotheses of the model are supported. The results have shown that asymmetric information measured by touristsʹ perception of effort results in low service quality at the destination and that tour operatorsʹ reputation has a significant role to play in mitigating touristsʹ price sensitivity in the source market and improving service quality at the destination.