Should antitrust regulators be wary of inter-firm coordination agreements through a tourism destination card?
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[1] Universidad de La Laguna
Universidad de La Laguna
San Cristóbal de La Laguna, España
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- Localización: Tourism economics: the business and finance of tourism and recreation, ISSN 1354-8166, Vol. 30, Nº. 2 (March), 2024, págs. 324-344
- Idioma: inglés
- Texto completo no disponible (Saber más ...)
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Resumen
Inter-firm coordination agreements through a destination card (DC) are a widespread profit-increasing strategy in tourism destinations. Literature on tourism economics argues that this type of coordination increases social efficiency. However, industrial organization studies consider heterogeneous consumers and warn that a DC-type agreement can be welfare impairing. Conflicting views have become an issue for tourism destinations, as collusion is in the crosshairs of antitrust regulators. This paper aims to clarify these contradictory results by developing a duopoly model with heterogeneous tourists. A sensible demand structure is assumed which, unlike previous literature, includes loyal demand segments. A policy prescription is obtained, namely, a DC alliance is welfare enhancing if DC price is equal to or lower than the cost of joint consumption under no coordination. However, a greater total surplus in markets may be accompanied by a reduction in consumer welfare, which differs from the conventional view in tourism economics.
