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Abstract
The authors solve a linear problem where a potential conflict between two agents (Destination manager and Firm) arises in a tourism destination. Destination manager has to choose how to allocate limited resources (capital and land) between either second homes or hotels. This conflict stems from the assumption of agents who have different linear preferences with respect to the allocation of limited resources. As a solution to this policy problem the authors consider three different policies: no intervention (laissez faire), taxation and temporary de-taxation policy. Comparing these different policies, the authors show that a compromise solution (internal solution), which results from the de-taxation policy, may be preferred by both agents over the clash of interests outcomes (corner solutions). Thus, the authors show that in a framework of ‘conflict’ between agents a compromise solution may be preferable to both the absence of public intervention and the imposition of a tax by a public policy maker who has the discretionary ‘power to regulate’ conflicts.
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Tourism Externalities
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Comments and Questions
This paper is good since departs from ideal assumptions and shapes the interaction of clashing interests in presence of credit constraints. The policy implications are therefore very interesting especially in periods of economic downturn.
I liked the paper. I think it can be improved by clarifying some issues:
i) the authors should be specific on what they mean for Technological Transfer in the context of tourism.
ii) some numbers, if available, would make the "stylized facts" section more effective.
iii) personally, I
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would prefer a more explicit reference to the timing dimension of the problem (expecially when discussing the de-taxation case).
iv) I am not convinced that the credit constraint is so binding for the firm. After all, building firms often receive at least part of the payment before the transaction is concluded.
v) What happens to the money collected by the Destination Manager in the taxation policy case? Why is it not used to subsidize the building of hotels (which maybe would make this analysis closer to the de-taxation case)?
vi) Why, in the de-taxation policy case, financial resources increases by the amount ny?
vii) Why the fact that the Destination Manager is also affected by the gap (S-s) is called a "common interest"? It seems to me that this element only increases the opportunity cost of not using land for the destination manager, which is already present in the basic formulation. Indeed, ax enters only equation (26), and it seems that this condition could hold (even if it less likely) also for ax=0. Am I wrong?
I enjoyed very much reading the paper. I believe that your model is effective in evaluating destination managers’ economic policies on the building firms’ investment decisions. A future extension of the model could include explicitly the effect of time in agents’ choices using a non-null intertemporal discount rate and introduce ...[more]
... uncertainty in building firms’ payoffs.
see attached file
Second homes, in comparison to hotels, have smaller tourism multiplier effects. However, is it true that they have same environmental negative externalities?
Destination managers could look for a right balance between hotels and second homes.