Clashes and Compromises: Investment Policies in Tourism Destinations

28 Pages Posted: 20 Feb 2012

See all articles by Guido Candela

Guido Candela

University of Bologna - Department of Economics

Massimiliano Castellani

University of Bologna - Department of Economics

Maurizio Mussoni

University of Bologna - Department of Economics; The Rimini Centre for Economic Analysis (RCEA)

Date Written: 2012

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.

Keywords: Conflict resolution, investment decisions, tourism and land use

JEL Classification: D74, G11, L83, R52

Suggested Citation

Candela, Guido and Castellani, Massimiliano and Mussoni, Maurizio, Clashes and Compromises: Investment Policies in Tourism Destinations (2012). Economics: The Open-Access Discussion Paper No. 2012-11, Available at SSRN: https://ssrn.com/abstract=2007734 or http://dx.doi.org/10.2139/ssrn.2007734

Guido Candela (Contact Author)

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 0541 434118-9 (Phone)
+39 0541 434120 (Fax)

Massimiliano Castellani

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Maurizio Mussoni

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, BO 40125
Italy

HOME PAGE: http://www2.dse.unibo.it/dsa/profile.php?id=232

The Rimini Centre for Economic Analysis (RCEA) ( email )

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Rimini, RN 47921
Italy

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