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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

Suggested Citation

  • 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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    References listed on IDEAS

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    1. 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.
    2. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
    3. 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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    8. Roberto Cellini & Luca Lambertini, 2004. "Private And Social Incentives Towards Investment In Product Differentiation," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 493-508.
    9. 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, May.
    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.
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    13. 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.
    14. M. Thea Sinclair, 1998. "Tourism and economic development: A survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(5), pages 1-51.
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    Citations

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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, Rimini Centre for Economic Analysis, vol. 2(3), pages 256-271, September.
    2. 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.
    3. Cellini, Roberto & Torrisi, Gianpiero, 2009. "The regional public spending for tourism in Italy: an empirical analysis," MPRA Paper 16917, University Library of Munich, Germany.
    4. Cellini, Roberto & Cuccia, Tiziana, 2014. "The Tourism Industry in Italy during the Great Recession (2008-12): What Data Show and Suggest," MPRA Paper 62473, University Library of Munich, Germany, revised Feb 2015.
    5. Vargas-Sánchez, Alfonso & Riquel-Ligero, Francisco, 2014. "Environmental Pressures on Tourism Companies: Simulation of Scenarios in Golf Course Operators," Journal of Spatial and Organizational Dynamics, CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve, vol. 2(1), pages 51-71.
    6. 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.
    7. Fabio Cerina, 2006. "Tourism Specialization and Sustainability: A Long-Run Policy Analysis," Working Papers 2006.11, Fondazione Eni Enrico Mattei.
    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. Schubert, Stefan Franz, 2009. "Coping with Externalities in Tourism - A Dynamic Optimal Taxation Approach," MPRA Paper 16736, University Library of Munich, Germany.
    10. repec:gam:jsusta:v:10:y:2018:i:2:p:503-:d:131776 is not listed on IDEAS
    11. F. Cerina, 2012. "Endogenous Growth and Sustainable Tourism," Working Paper CRENoS 201234, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    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. 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.

    More about this item

    Keywords

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

    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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