Tourism Investments under Uncertainty: An Economic Analysis of ‘Eco-Monsters’

Guido Candela, Massimiliano Castellani and Maurizio Mussoni

Tourism Economics, 2009, vol. 15, issue 3, 671-688

Abstract: ‘Ecological monsters’ can be the legal outcome of rational choices made by three players: a firm, a policymaker and Nature. The firm asks the local policymaker for permission to undertake a real investment project in a stochastic framework, with real options and environmental externalities. The model consists of a non-cooperative game and its solution implies a bizarre outcome, both for the firm when it interrupts and abandons the investment project and for the policymaker when it is unable to avoid eco-monsters. Policy implications and partisan effects are explored.

Keywords: non-cooperative games; externalities; real options (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:15:y:2009:i:3:p:671-688

DOI: 10.5367/000000009789036639

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