Optimal transport provision to a tourist destination: A contract theory perspective ¬リニ

a r t i c l e i n f o 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. Third, we generalize the previous analysis by analyzing the case in which the firm can be of infinitely many types. Finally, we note that policy makers can reduce the negative effects of asym-metric information in practical settings by engaging in underwriting or obtaining additional information, by asking the firm to provide references, and by inspecting past transport infrastructure projects completed by the firm. For any tourist destination to actually be attractive to tourists, it is essential that the infrastructure associated with this destination be adequately developed. A key aspect of this infrastructure is transport infrastructure. Put differently, an otherwise attractive tourist destination will generally experience a suboptimal number of visitors if it is difficult to reach. These points are well understood in the tourism literature and hence there is now a substantial empirical and case study based literature that has studied alternate aspects of the connections between transport provision and the desirability of specific tourist destinations. 1 More than a decade ago, Prideaux (2000) focused on Cairns, Australia and pointed to the salient role played by the transport infrastructure in developing this particular tourist destination. Studying tourism in South Africa, Saayman et al. (2000) contend that a long-term strategy for encouraging tourism in this nation must involve investment in transport infrastructure. Madsen and Jensen-Butler (2004) concentrate on Denmark and study the ways in which changes in transport costs and bridge tolls have impacted economic activity at what they call the " sub-regional " level. Khadaroo and Seetanah (2007, 2008) focus on Mauritius and note that tourists from Asia, Europe, and the United States are all very sensitive to the transport infrastructure present on this island. Although there has been progress in promoting …