Abstract
Abstract The authors solve a linear problem where a potential conflict between two agents (Destination manager and Firm) arises in a tourism destination. The 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, they 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.
Highlights
A potential policy dilemma related to tourism investments arises in tourism destinations where there is unutilized land, unemployment and limited financial resources:1 how to allocate the land, by definition a limited resource, between two possible utilizations, either to hotels or to private holiday accommodations.2 In spite of its importance, the phenomenon of second homes has rarely been the focus of studies in the tourism economics literature.3In this paper, we propose a theoretical model to analyze the optimal development strategies for attracting tourism investments
2 Stylized Facts and Theoretical Framework. To study this policy dilemma, we take into consideration two agents in the same tourism destination, who usually interact in the real world in the following way: (i) a Destination manager who sets up the tourism destination-planning scheme, and (ii) a Firm which builds second homes and/or hotels, according to the planning scheme, and sells them on the market
24 See Appendix for the sufficient conditions for the existence of a solution. Both well-developed and still-developing tourism destinations often are interested in undertaking tourism investments in second homes and/or hotels
Summary
A potential policy dilemma related to tourism investments arises in tourism destinations where there is unutilized land, unemployment and limited financial resources: how to allocate the land, by definition a limited resource, between two possible utilizations, either to hotels or to private holiday accommodations (second homes). In spite of its importance, the phenomenon of second homes has rarely been the focus of studies in the tourism economics literature.. We analyze situations where the policy maker has economic or institutional discretionary “power to regulate” conflicts, in order to determine when a compromise solution is preferable to a clash solution and under what conditions such a solution is preferable to the other. To answer these questions, we analyze a conflict resolution model, where a public agent and a private agent have clashing interests: the public agent wants to entice the private agent to make a specific choice using a given set of available policies. The conclusions summarize the main results of the paper and some future lines of research
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