Pigouvian Taxation in Tourism

Claudio Piga

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: The paper studies the characteristics and the effects of a tax imposed by a local government on the land used to create new tourists' accommodations. First, a dynamic policy game between a monopolist in a tourist area and a local government is considered. In each period the former has to decide the size of land undergoing development whereas the latter has to choose the tax to levy on each newly developed area unit. Linear Perfect Markov strategies are derived for both the non-cooperative and the public monopoly case. In equilibrium a public monopoly would develop land more rapidly than a private monopoly. Furthermore, the more the monopolist discounts the future, the more the long run use of the natural resource is reduced. Second, the properties of the tax are studied considering an oligopolistic market structure. The tax alone does not lead to the socially optimal level of land use. However, its combined eect with another policy instrument such as a quota induces the optimal level of resource use.

Keywords: Tourism; Taxation; Land Use; differential game; time consistency. (search for similar items in EconPapers)
JEL-codes: H21 L50 L83 Q32 R52 (search for similar items in EconPapers)
Date: 2006-01, Revised 2006-01
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-tur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: Pigouvian Taxation in Tourism (2003)
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