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Tourist choice, competitive tourism markets and the effect of a tourist tax on producers revenues

Author

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  • Asensi Descals-Tormo

    (Department of Applied Economics, Universitat de València (Spain))

  • Jose Ramon Ruiz-Tamarit

    (Department of Economic Analysis, Universitat de València (Spain) & IRES/LIDAM, UCLouvain)

Abstract

We propose a model for the tourism sector assuming basically two markets, one for tourist services and the other for accommodation. These sub-markets are considered as separate but interrelated. The nature of the feedback is determined by a vertical complementarity between tourist services and lodging. We obtain the optimal solution of the tourist choice problem, the primary demand for tourist services and the derived demand for overnight stays. Then, we focus on the equilibrium outcomes assuming perfectly competitive tourism markets. We don’t address the externalities caused by tourism activities. Consequently, we move away from efficiency by introducing a tax on overnight stays and inspecting the consequences for the competitiveness and for producers’ revenues in each market. The answer key elements are, apart from reservation prices, the direct and cross price elasticities of demand for tourist services. The study of structural parameters extends and completes our analysis of tourism.

Suggested Citation

  • Asensi Descals-Tormo & Jose Ramon Ruiz-Tamarit, 2022. "Tourist choice, competitive tourism markets and the effect of a tourist tax on producers revenues," LIDAM Discussion Papers IRES 2022018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2022018
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    References listed on IDEAS

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    1. Rugg, Donald, 1973. "The Choice of Journey Destination: A Theoretical and Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 64-72, February.
    2. Bird, Richard M., 1992. "Taxing tourism in developing countries," World Development, Elsevier, vol. 20(8), pages 1145-1158, August.
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    Cited by:

    1. Asensi Descals-Tormo & Maria J. Murgui-García & Jose Ramon Ruiz-Tamari, 2023. "A theoretical model-based indirect estimation of the direct and cross price elasticities of demand for tourist goods and services," LIDAM Discussion Papers IRES 2023013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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    More about this item

    Keywords

    Complementarity; Elasticity; Preferences; Tax; Tourism;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • Z3 - Other Special Topics - - Tourism Economics

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