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Optimal Transport Provision To A Tourist Destination: A Mechanism Design Approach

Author

Listed:
  • Amitrajeet A. Batabyal

    (Department of Economics, Rochester Institute of Technology)

  • Hamid Beladi

    (UTSA)

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.

Suggested Citation

  • Amitrajeet A. Batabyal & Hamid Beladi, 2015. "Optimal Transport Provision To A Tourist Destination: A Mechanism Design Approach," Working Papers 0140eco, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0140eco
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    References listed on IDEAS

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    1. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, April.
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    More about this item

    Keywords

    Asymmetric Information; Contract; Destination; Tourist; Transport Infrastructure;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • R49 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Other

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