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Competition between and within Tourist Destinations

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  • Lorenzo Zirulia

    () (Department of Economics, University of Bologna, Italy; KITeS, Bocconi University, Italy; The Rimini Centre for Economic Analysis (RCEA), Italy)

Abstract

The aim of this paper is to analyze theoretically two levels of competition that are relevant in tourism markets, i.e. between and within tourist destinations. In particular, the focus of this paper lies in the relationship between the degree of (exogenous) differentiation between destinations and the (endogenous) degree of competition within the destination. Our main result is that an increase in the intensity of competition between destinations induces destination managers to increase competition within each destination. When the intensity of competition between destinations increases, the incentives to increase the intensity of competition within the destination are higher, since the subsequent increase in price leads to a larger gain in market shares. However, the strategy is followed by all destinations, with the consequence that firms' profits in both destinations are dispersed in a "prisoner's dilemma" scenario, reinforcing the negative effect of the increase in between destinations competition.

Suggested Citation

  • Lorenzo Zirulia, 2009. "Competition between and within Tourist Destinations," Working Paper series 39_09, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:39_09
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    References listed on IDEAS

    as
    1. Julio J. Rotemberg & Michael Woodford, 1998. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy: Expanded Version," NBER Technical Working Papers 0233, National Bureau of Economic Research, Inc.
    2. Carl Walsh, 2003. "Speed Limit Policies: The Output Gap and Optimal Monetary Policy," American Economic Review, American Economic Association, vol. 93(1), pages 265-278, March.
    3. Glenn D. Rudebusch, 2002. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Economic Journal, Royal Economic Society, vol. 112(479), pages 402-432, April.
    4. Henrik Jensen, 2002. "Targeting Nominal Income Growth or Inflation?," American Economic Review, American Economic Association, pages 928-956.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    tourist destinations; tourism markets; hospitality industry;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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