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Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly

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  • Guido Candela
  • Roberto Cellini

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Abstract

We present a theoretical dynamic model in tourism economics, assuming that the market for tourism is an oligopoly with differentiated products. Destinations can invest in order to improve their stock of physical, natural or cultural resources. Tourism flows yield current revenues, but they are usually detrimental for the stock of resources. We find the solution of the dynamic model, and in particular we find the open-loop Nash equilibrium of the game among destinations, under alternative settings, depending on whether the degree of differentiation among destinations is exogenous or endogenous. In particular, under the latter case, an increase of the number of destinations leads to a higher degree of product differentiation in steady state. Copyright Springer Science+Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s10640-006-9005-3
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 35 (2006)
Issue (Month): 1 (September)
Pages: 41-58

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Handle: RePEc:kap:enreec:v:35:y:2006:i:1:p:41-58

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: differential games; reservation price; tourism; D43; D92; L83;

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References

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  1. Throsby,David, 2000. "Economics and Culture," Cambridge Books, Cambridge University Press, number 9780521586399, October.
  2. Cellini, Roberto & Lambertini, Luca, 2002. "A differential game approach to investment in product differentiation," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 51-62, November.
  3. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 1999. "Agglomeration and trade revisited," CORE Discussion Papers 1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Fershtman, C. & Nitzan, S., 1988. "Dynamic Voluntary Provision Of Public Goods," Papers 21-88, Tel Aviv.
  5. Reynolds, Stanley S, 1987. "Capacity Investment, Preemption and Commitment in an Infinite Horizon Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 69-88, February.
  6. Reynolds, Stanley S., 1991. "Dynamic oligopoly with capacity adjustment costs," Journal of Economic Dynamics and Control, Elsevier, vol. 15(3), pages 491-514, July.
  7. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, October.
  8. Forster, Bruce A., 1980. "Optimal energy use in a polluted environment," Journal of Environmental Economics and Management, Elsevier, vol. 7(4), pages 321-333, December.
  9. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  10. Claudio A. Piga, 2006. "Pigouvian Taxation in Tourism," Discussion Paper Series 2006_2, Department of Economics, Loughborough University, revised Jan 2006.
  11. R. Cellini & L. Lambertini, 2002. "Private and Social Incentives Towards Investment in Product Differentiation," Working Papers 431, Dipartimento Scienze Economiche, Universita' di Bologna.
  12. M. Thea Sinclair, 1998. "Tourism and economic development: A survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(5), pages 1-51.
  13. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
  14. R. Cellini & L. Lambertini, 2001. "Differential Oligopoly Games where the Closed-Loop Memoryless and Open-Loop Equilibria Coincide," Working Papers 402, Dipartimento Scienze Economiche, Universita' di Bologna.
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Citations

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Cited by:
  1. Mahbuba Alieva, 2010. "Uzbek Travel Services Industry And International Comparison," Perspectives of Innovation in Economics and Business (PIEB), Prague Development Center, vol. 6(3), pages 66-70, October.
  2. Blanco, Ester & Lozano, Javier & Rey-Maquieira, Javier, 2009. "A dynamic approach to voluntary environmental contributions in tourism," Ecological Economics, Elsevier, vol. 69(1), pages 104-114, November.
  3. Schubert, Stefan Franz, 2009. "Coping with Externalities in Tourism - A Dynamic Optimal Taxation Approach," MPRA Paper 16736, University Library of Munich, Germany.
  4. Fabio Cerina, 2006. "Tourism Specialization and Sustainability: A Long-Run Policy Analysis," Working Papers 2006.11, Fondazione Eni Enrico Mattei.
  5. Guido Candela & Paolo Figini, 2010. "Destination Unknown. Is there any Economics Beyond Tourism Areas?," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 2(3), pages 256-271, September.
  6. F. Cerina, 2012. "Endogenous Growth and Sustainable Tourism," Working Paper CRENoS 201234, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  7. Cellini, Roberto & Torrisi, Gianpiero, 2009. "The regional public spending for tourism in Italy: An empirical analysis," MPRA Paper 16131, University Library of Munich, Germany.
  8. S. Giannoni & F. Cerina, 2008. "Pollution Adverse Tourists and Growth," Working Paper CRENoS 200822, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  9. Correani, Luca & Garofalo, Giuseppe, 2008. "Chaos in the tourism industry," MPRA Paper 9677, University Library of Munich, Germany.

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