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Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly

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  • Guido Candela
  • Roberto Cellini

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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  • Guido Candela & Roberto Cellini, 2006. "Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(1), pages 41-58, September.
    • Handle: RePEc:kap:enreec:v:35:y:2006:i:1:p:41-58
    DOI: 10.1007/s10640-006-9005-3
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    Cited by:

    1. Guido Candela & Paolo Figini, 2010. "Destination Unknown. Is there any Economics Beyond Tourism Areas?," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 2(3), pages 256-271, September.
    2. Juan Antonio Duro & António Osório & Alejandro Perez-Laborda, 2023. "Competition for domestic tourism in the COVID-19 pandemic: A characterization using a contest model," Tourism Economics, , vol. 29(2), pages 378-391, March.
    3. Xin, Baogui & Sun, Minghe, 2018. "A differential oligopoly game for optimal production planning and water savings," European Journal of Operational Research, Elsevier, vol. 269(1), pages 206-217.
    4. Esther Blanco & Javier Lozano, 2015. "Ecolabels, uncertified abatement, and the sustainability of natural resources: an evolutionary approach," Journal of Evolutionary Economics, Springer, vol. 25(3), pages 623-647, July.
    5. George Q. Huang & Wanli Chen & Haiyan Song & Xinyan Zhang, 2010. "Game-Theoretic Study of the Dynamics of Tourism Supply Chains for Package Holidays under Quantity Competition," Tourism Economics, , vol. 16(1), pages 197-216, March.
    6. Chenavaz, Régis Y. & Leocata, Marta & Ogonowska, Malgorzata & Torre, Dominique, 2022. "Sustainable tourism," Journal of Economic Dynamics and Control, Elsevier, vol. 143(C).
    7. 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.
    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. Cellini, Roberto & Cuccia, Tiziana, 2014. "The Tourism Industry in Italy during the Great Recession (2008-12): What Data Show and Suggest," MPRA Paper 60999, University Library of Munich, Germany.
    10. Roberto Cellini & Gianpiero Torrisi, 2013. "Regional Public Spending for Tourism in Italy: An Empirical Analysis," Tourism Economics, , vol. 19(6), pages 1361-1384, December.
    11. Alieva, Mahbuba, 2010. "Uzbek travel services industry and international comparison," Perspectives of Innovations, Economics and Business (PIEB), Prague Development Center (PRADEC), vol. 6(3), pages 1-5, October.
    12. Correani, Luca & Garofalo, Giuseppe, 2008. "Chaos in the tourism industry," MPRA Paper 9677, University Library of Munich, Germany.
    13. Hong, Tao & Ma, Tao & Huan, Tzung-Cheng (T.C.), 2015. "Network behavior as driving forces for tourism flows," Journal of Business Research, Elsevier, vol. 68(1), pages 146-156.
    14. Stefan F Schubert & Günter Schamel, 2021. "Sustainable tourism development: A dynamic model incorporating resident spillovers," Tourism Economics, , vol. 27(7), pages 1561-1587, November.
    15. Simone Marsiglio, 2017. "On the carrying capacity and the optimal number of visitors in tourism destinations," Tourism Economics, , vol. 23(3), pages 632-646, May.
    16. Vargas-Sánchez, Alfonso & Riquel-Ligero, Francisco, 2014. "Environmental Pressures on Tourism Companies: Simulation of Scenarios in Golf Course Operators," Journal of Tourism, Sustainability and Well-being, Cinturs - Research Centre for Tourism, Sustainability and Well-being, University of Algarve, vol. 2(1), pages 51-71.
    17. Stauvermann, Peter Josef & Kumar, Ronald Ravinesh, 2017. "Productivity growth and income in the tourism sector: Role of tourism demand and human capital investment," Tourism Management, Elsevier, vol. 61(C), pages 426-433.
    18. Cerina, Fabio, 2006. "Tourism Specialization and Sustainability: A Long-Run Policy Analysis," Natural Resources Management Working Papers 12142, Fondazione Eni Enrico Mattei (FEEM).
    19. Stefan F. Schubert, 2010. "Coping with Externalities in Tourism: A Dynamic Optimal Taxation Approach," Tourism Economics, , vol. 16(2), pages 321-343, June.
    20. Antonio Alvarez-Sousa, 2018. "The Problems of Tourist Sustainability in Cultural Cities: Socio-Political Perceptions and Interests Management," Sustainability, MDPI, vol. 10(2), pages 1-30, February.
    21. F. Cerina, 2012. "Endogenous Growth and Sustainable Tourism," Working Paper CRENoS 201234, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    22. 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.
    23. Buckley, Ralf, 2013. "Social-benefit certification as a game," Tourism Management, Elsevier, vol. 37(C), pages 203-209.

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    More about this item

    Keywords

    differential games; reservation price; tourism; D43; D92; L83;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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