Tourism Demand and Environmental Investment: A Model with Three Tourist Regions

Revista Brasileira de Economia de Empresas, Vol. 7, No. 1, 2008

8 Pages Posted: 11 Oct 2006 Last revised: 6 Mar 2018

See all articles by Juan Gabriel Brida

Juan Gabriel Brida

Universidad de la República

Juan Sebastián Pereyra

Universidad de la República - Facultad de Ciencias Económicas; El Colegio de México

Date Written: October 2006

Abstract

In this short paper we present a simple model of three tourist regions to study the incentives of hotels to invest in environmental quality. In particular, we show that the price of a hotel room depends positively on the level of investment to preserve the natural characteristics of the region and negatively on the relative investments of the other regions. In this sense, we show that to maintain the tourist demand for rooms the hotels must invest continuously in environmental quality. Regions with low investment in preserving environmental quality have a high probability of disappearing as a tourist destination. We also show that the incentive to invest in environmental quality is a decreasing function of the number of hotels located in a particular region and that the incentive of hotel chains to invest in environmental quality is dependent on whether they are local or international.

Keywords: Environmental investment, tourism demand, circular city

JEL Classification: D43, L83, Q21, Q26

Suggested Citation

Brida, Juan Gabriel and Pereyra, Juan Sebastián, Tourism Demand and Environmental Investment: A Model with Three Tourist Regions (October 2006). Revista Brasileira de Economia de Empresas, Vol. 7, No. 1, 2008. Available at SSRN: https://ssrn.com/abstract=936575 or http://dx.doi.org/10.2139/ssrn.936575

Juan Gabriel Brida (Contact Author)

Universidad de la República ( email )

Av. 18 de Julio
Montevideo, 1968
Uruguay

Juan Sebastián Pereyra

Universidad de la República - Facultad de Ciencias Económicas ( email )

Gonzalo Ramírez 1926
CP 11200 Montevideo
Uruguay

El Colegio de México ( email )

Gonzalo Ramírez 1926
CP 11200 Montevideo
Uruguay

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