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Second Homes vs. Hotels: A Suggestion for a Self-enforcing Policy

  • Guido Candela


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

  • Massimiliano Castellani


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

  • Maurizio Mussoni


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

We set up a theoretical model, in which the policy maker of a tourism destination has to choose how to allocate the limited natural resource - land - between private holiday accommodations (i.e. second homes) or hotels. In a framework of partial equilibrium, the policy maker minimizes a loss function which measures the loss of political consensus and is de ned by a linear combination of the policy maker and the local community preferences. We can obtain both a corner solution, in which we have extreme choices of only holiday houses or only hotels, and an internal solution, in which we have a linear combination of them. To do that the policy maker can use as economic policy instruments either standard policies (indirect control - a Pigou tax - or direct control - regulation) or non-standard policies (a reinvestment commitment of the rm in the tourism destination). The final policy maker decision was made by assessing the welfare consequences of the policy implications.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 50-07.

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Date of creation: Jul 2007
Date of revision: Jul 2007
Handle: RePEc:rim:rimwps:50-07
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  1. Claudio A. Piga, 2006. "Pigouvian Taxation in Tourism," Discussion Paper Series 2006_2, Department of Economics, Loughborough University, revised Jan 2006.
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