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Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly

  • Guido Candela
  • Roberto Cellini

    ()

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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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
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100263

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  1. 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.
  2. Claudio Piga, 2003. "Pigouvian Taxation in Tourism," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(3), pages 343-359, November.
  3. R. Cellini & L. Lambertini, 2002. "Private and Social Incentives Towards Investment in Product Differentiation," Working Papers 431, Dipartimento Scienze Economiche, Universita' di Bologna.
  4. Throsby,David, 2000. "Economics and Culture," Cambridge Books, Cambridge University Press, number 9780521586399.
  5. Reynolds, Stanley S., 1991. "Dynamic oligopoly with capacity adjustment costs," Journal of Economic Dynamics and Control, Elsevier, vol. 15(3), pages 491-514, July.
  6. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, June.
  7. OTTAVIANO, Gianmarco & TABUCHI , Takatoshi & THISSE, Jacques-François, . "Agglomeration and trade revisited," CORE Discussion Papers RP 1553, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  9. Fershtman, Chaim & Nitzan, Shmuel, 1991. "Dynamic voluntary provision of public goods," European Economic Review, Elsevier, vol. 35(5), pages 1057-1067, July.
  10. 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.
  11. 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.
  12. 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.
  13. M. Thea Sinclair, 1998. "Tourism and economic development: A survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(5), pages 1-51.
  14. 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.
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