The Economics of Local Tourist Systems

We present a simple model of Local Tourist Systems (LTS), which encompasses similarities and differences with Industrial Districts (ID) and Cultural Districts (CD). LTS, modelled as a special case of Marshallian Industrial Districts, allow the identification of policy tools for managing tourism destinations. Moreover, in the LTS framework the anticommon nature of the tourism product can be stressed. As the tourist has to buy different but intertwined goods composing the holiday package, the failure in one of the markets can lead to an overall failure. The LTS management can co-ordinate the pricing policy of the different firms supplying “single components” of the tourist product, set the price of the whole product, and impute a price to each component. Under fairly general conditions, price policy co-ordination allows the LTS to increase both the flow of tourists and firms’ profits, thereby reaching a welfare improving equilibrium. The recent introduction of LTS in the Italian legislation can be seen as an attempt of improving such co-ordination issues in the tourism sector.