OPTIMAL TRANSPORT PROVISION TO A TOURIST DESTINATION: A MECHANISM DESIGN APPROACH

Amitrajeet Batabyal and Hamid Beladi

Working Papers from College of Business, University of Texas at San Antonio

Abstract: How to provide transport infrastructure to a tourist destination optimally is a salient question in tourism economics. Even so, this question has received no theoretical attention in the literature. Hence, we use contract theory to provide the first theoretical analysis of the optimal provision of transport infrastructure by an asymmetrically informed tourist agency (TA) interested in promoting a particular destination to tourists. Specifically, we first delineate our model and then solve for the first-best contract describing the interaction between the TA and a transport infrastructure providing firm. Second, we study the optimal second-best contract with asymmetric information when the above firm can be of two possible types. Finally, we conclude and then discuss extensions of the research described in this paper.

Keywords: Asymmetric Information; Contract; Destination; Tourist; Transport Infrastructure (search for similar items in EconPapers)
JEL-codes: L83 R49 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2015
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Published in Review of Economics, March 1999, pages 1-23

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Working Paper: OPTIMAL TRANSPORT PROVISION TO A TOURIST DESTINATION: A MECHANISM DESIGN APPROACH (2015)
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