Abstract
AbstractIn this article, the authors present a theoretical model to investigate the private and social incentives to reduce seasonality in a given market. They assume that consumers derive different utilities from the consumption of the same good in different seasons. The seasonal product differentiation is modelled along the lines of Gabszewicz and Thisse (Price Competition, Quality and Income Disparities, 1979) and Shaked and Sutton (Relaxing Price Competition through Product Differentiation, 1982). The authors assume that it is possible for a firm to invest in order to reduce the degree of the demand seasonality. They show that, for a wide set of parameter configuration, the optimal effort to reduce seasonality is higher from a social welfare perspective, as compared to the private producer perspective. The tourism market can represent an application of the present model. However, unlike most available literature in this field, their model provides a microeconomic basis for the evaluation of investments aimed at reducing seasonality, rather than taking a macroeconomic approach.
Highlights
Seasonality is a major concern in several markets of very different sectors
In this paper we show that a conflict does arise between social and private incentive to invest for reducing seasonality, even if we do not consider social costs emerging from externality effects
The application to markets of tourism, which we have provided in the paper, is straightforward but not unique
Summary
Seasonality is a major concern in several markets of very different sectors (tourism, transport, energy, agricultural and food items, arts and movies, till to financial products). It can happen that both the social planner and the private firms find it optimal to serve the market in both seasons (though partially uncovered) but the optimal effort for reducing seasonality from a private perspective is smaller as compared to the social choice. The reason for the conflict between public and private incentive to reduce seasonality rests on the fact that policy-makers take into account the utility of consumers, whereas firms are interested in their own profits only. The conflict between public and private incentives to mitigate seasonality rests on the trivial fact that producers benefit from a limited seasonality degree and consumers, thanks to the higher utilities generated by the deseasonalization measures. Extensions to oligopoly or other market forms are left to further analysis
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
