Tourism investments under uncertainty: an economic analysis of 'eco-monsters'

Authors: Candela, Guido; Castellani, Massimiliano; Mussoni, Maurizio

Source: Tourism Economics, Volume 15, Number 3, September 2009 , pp. 671-688(18)

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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

Document Type: Research article

DOI: http://dx.doi.org/10.5367/000000009789036639

Publication date: 2009-09-01

More about this publication?

Tourism Economics, published bimonthly, is a peer-reviewed journal devoted to the economics and finance of tourism worldwide. Articles address the components of the tourism product (accommodation; restaurants; merchandizing; attractions; transport; entertainment; tourist activities); and the economic organization of tourism at micro and macro levels (market structure; role of public/private sectors; community interests; strategic planning; marketing; finance; economic development).
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