Article Price competition in a tourism supply chain Sarat Kumar Jena Goa Institute of Management, India Deepti Jog Goa Institute of Management, India Abstract In recent trend, advertising is seen to significantly impact channel members’ demand, pricing and profit in tourism supply chain (TSC). Most TSC studies, to date, assumed the market demand to be influenced only by tour price under price competitive environment, not considering the effect of advertising investment. In order to address this problem, two models are established considering decentralized channels: tour operator Stackelberg (TS) and local operator Stackelberg (LS). We analytically show TS model to provide better results than LS model and advertising to strongly influence the channel members’ pricing strategies and profit. Then we generalized the solution considering multiple operators under price competition. We studied two coordination mechan- isms, cooperative advertising and two-part tariff, and found the two-part tariff provides better mechanism for improving the profit in LS model compared to cooperative advertisement. Keywords advertising, local operator, pricing, tourism supply chain, tour operator, Stackelberg game Introduction In the current highly competitive environment, the tourism industry has progressed and restruc- tured significantly. These extremely competitive environments have made it necessary for the tourism corporations to choose different ways to enhance the competitive advantage (Qi et al., 2009). Tourism industry faces the challenges of improving the business profitability without considering any effect on customer service under competitive market. For instance, an e-tourism commercial format has seen considerable growth in the tourism industry. Due to this, in recent years, tourism can be accounted as one of the industries in service sector that has developed Corresponding author: Sarat Kumar Jena, Goa Institute of Management, Poriem, Sanquelim 403505, India. Email: saratjena@gim.ac.in Tourism Economics 1–20 ª The Author(s) 2016 Reprints and permission: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/1354816616674611 te.sagepub.com