Research on product differentiation in Chinese travel agencies based on game theory

The paper investigates the main causes of low price competition between two agencies in the differential model from the perspective of quantitative method according to the present vicious price competition. Based on the original model, the influence of differentiation on the price and market demand is analyzed with product differentiation implemented by one travel agency through introducing value-added services variables. The results show that travel agencies can avoid low price competition by product differentiation only when the differential efficiency is limited within a certain range. Finally, the effect of the differential degree on the differential efficiency is further researched. It is found that the low differential degree will lead to the low differential efficiency. Furthermore, it will realize the significant differential efficiency when differentiation rises to some extent.