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Clashes and compromises: Investment policies in tourism destinations

Author

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  • Candela, Guido
  • Castellani, Massimiliano
  • Mussoni, Maurizio

Abstract

The authors solve a linear problem where a potential conflict between two agents (Destination manager and Firm) arises in a tourism destination. The Destination manager has to choose how to allocate limited resources (capital and land) between either second homes or hotels. This conflict stems from the assumption of agents who have different linear preferences with respect to the allocation of limited resources. As a solution to this policy problem the authors consider three different policies: no intervention (laissez faire), taxation and temporary de-taxation policy. Comparing these different policies, they show that a compromise solution (internal solution), which results from the de-taxation policy, may be preferred by both agents over the clash of interests outcomes (corner solutions). Thus, the authors show that in a framework of "conflict" between agents a compromise solution may be preferable to both the absence of public intervention and the imposition of a tax by a public policy maker who has the discretionary power to regulate conflicts.

Suggested Citation

  • Candela, Guido & Castellani, Massimiliano & Mussoni, Maurizio, 2012. "Clashes and compromises: Investment policies in tourism destinations," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-25.
  • Handle: RePEc:zbw:ifweej:201223
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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2012-23
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    File URL: https://www.econstor.eu/bitstream/10419/59451/1/718124944.pdf
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    References listed on IDEAS

    as
    1. Nicola acocella & Giovanni Di Bartolomeo & Andrew Hughes Hallett, "undated". "The theory of economic policy: from a theory of control to a theory of conflict (resolutions)," Working Papers 91/11, Sapienza University of Rome, Metodi e modelli per l'economia, il territorio e la finanza MEMOTEF.
    2. Claudio Piga, 2003. "Pigouvian Taxation in Tourism," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(3), pages 343-359, November.
    3. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    conflict resolution; investment decisions; tourism and land use;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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