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Tourism Investments Under Uncertainty: an Economic Analysis of "Eco-monsters"

Author

Listed:
  • Guido Candela

    (University of Bologna and The Rimini Centre for Economic Analysis, Rimini, Italy)

  • Massimiliano Castellani

    (University of Bologna and The Rimini Centre for Economic Analysis, Rimini, Italy)

  • Maurizio Mussoni

    (University of Bologna and The Rimini Centre for Economic Analysis, Rimini, Italy)

Abstract

“Ecological monsters” (“eco-monsters”) can be the bizarre, but legal, outcome of rational choices made by two agents: (i) a firm whose investments depend on Governmental permits; (ii) a policy maker having the discretionary power on the permits. This paper will determine the existence conditions which create a legal “eco-monster”. The model consists of a sequential noncooperative game with equilibrium in terms of positive expected firm profits and policy maker net balance ending up with a non-zero-sum game and a double failure: (i) a market failure, when the firm interrupts and abandons the investment, and (ii) a public failure, when the policy maker can not avoid the creation of “eco-monsters”. Policy implications and partisan party effects are explored: for certain parameters values, the economic policy can be ineffective in decreasing the “ecomonsters” frequency as a paradoxical, but rational, outcome in a stochastic framework, with real options and environmental externalities. JEL Classifications: C72-D62-D73

Suggested Citation

  • Guido Candela & Massimiliano Castellani & Maurizio Mussoni, 2008. "Tourism Investments Under Uncertainty: an Economic Analysis of "Eco-monsters"," Working Paper series 07_08, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:07_08
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    References listed on IDEAS

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    Cited by:

    1. Rakela Thano, 2013. "Touristic Investments in Saranda Region," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(2), pages 1-9, April.
    2. Rakela Thano, 2013. "Touristic Investments In Saranda Region," Romanian Economic Business Review, Romanian-American University, vol. 8(2), pages 117-130, June.

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    More about this item

    Keywords

    Noncooperative Games; Externalities; Real Options;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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