The Economics of Local Tourist Systems

In this paper we analyse the Local Tourist System (LTS) as a particular case of Marshallian Industrial District. The LTS allows the identification of more effective policy tools for managing tourism. First, through the concept of LTS, the policy maker can take into account the complexity of tourism, characterised by a strong heterogeneity of goods, services and subjects involved; second, LTS helps promote a stronger co-ordination between the public and the private sector, by identifying a homogeneous territory and recognising its importance in tourists' decisions; third, through the LTS the policymaker can analyze the externalities and promotes the idea of collaborating networks in a context of local development. In the LTS framework, the anticommon problem can be analysed and contrasted. As the tourist has to buy different but intertwined goods which compose the holiday package, the failure in one of the markets can lead to the overall failure of the package. A LTS policy has to: i) co-ordinate the price policy of the different firms supplying “single components” of the tourist product; ii) fix the price of the whole product; iii) impute a price to each component. We demonstrate that, through price policy co-ordination and under general conditions, the LTS can increase the size of tourism and the firms’ profits, thereby reaching a more effective and efficient target in tourism policy. The recent introduction of LTS in the Italian legislation can be seen as a positive attempt of improving co-ordination in a complex sector such as tourism.