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Private and public incentive to reduce seasonality: A theoretical model

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  • Cellini, Roberto
  • Rizzo, Giuseppe

Abstract

This paper presents a theoretical model to investigate the incentive of private producer and policymaker to reduce seasonality in a given market, where consumers derive different utilities from the consumption of the good in different seasons. The (seasonal) product differentiation is modelled along the lines of the contributions of Gabszewicz and Thisse (Price Competition, Quality and Income Disparities, 1979) and Shaked and Sutton (Relaxing Price Competition through Product Differentiation, 1982). The authors take into consideration that investments are possible to reduce the degree of seasonality. They show that, for a wide set of parameter configuration, the policy maker finds it optimal to make more effort to reduce seasonality as compared to private producers. The theoretical conclusion is consistent with empirical and anecdotical evidence, especially in the field of tourism markets.

Suggested Citation

  • Cellini, Roberto & Rizzo, Giuseppe, 2012. "Private and public incentive to reduce seasonality: A theoretical model," Economics Discussion Papers 2012-16, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201216
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    References listed on IDEAS

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    1. repec:eee:touman:v:32:y:2011:i:3:p:589-595 is not listed on IDEAS
    2. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    3. Ghysels,Eric & Osborn,Denise R., 2001. "The Econometric Analysis of Seasonal Time Series," Cambridge Books, Cambridge University Press, number 9780521565882, May.
    4. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    5. GABSZEWICZ, Jean, 2009. "A note on price competition in product differentiation models," CORE Discussion Papers 2009058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Javier Capó Parrilla & Antoni Riera Font & Jaume Rosselló Nadal, 2006. "The Accommodation Determinants of Seasonal Patterns," CRE Working Papers (Documents de treball del CRE) 2006/01, Centre de Recerca Econòmica (UIB ·"Sa Nostra"), revised Feb 2006.
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    1. repec:eee:touman:v:46:y:2015:i:c:p:283-298 is not listed on IDEAS

    More about this item

    Keywords

    seasonality; tourism; public spending;

    JEL classification:

    • D29 - Microeconomics - - Production and Organizations - - - Other
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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