Abstract
Models of international tourism demand which incorporate substitute prices as explanatory variables are specified. In tourism there are two price components, the transport cost to the destination and the living cost in the destination, and hence it is necessary to allow for both costs to and in substitute destinations. The substitute price variables are constructed using a weighting system based on market shares of major competing destinations, but the weights are allowed to alter throughout the estimation period to cater for changing trends. The empirical results support the hypothesis that substitute prices play an important role in determining the demand for international tourism, but there is considerable variation in importance according to the origin under consideration and the mode of transport
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