Residents’ Influence on the Adoption of

Environmental Norms in Tourism

Malgorzata OGONOWSKA

Dominique TORRE

Université de Nice – Sophia Antipolis, France

GREDEG - CNRS

Problem Definition

Local population

TOURISMincludes

wide

Environment

widerange of

economic activities

6-7/06/2013 Nice 2XXXèmes Journées de Microéconomie

Appliquée

Problem Definition

Since 1990s: actors’ awareness of pollution and environmental protection

Modification of tourists’ preferences & intensification of local populations’ resistance to tourism related activitiespopulations’ resistance to tourism related activities

Sustainable Tourism:

“Every tourism activity that preserves for a long time the local natural, cultural and social resources, contributing to the well-being of

individuals living in those tourist areas”

(Associazione Italiana Turismo Responsabile)

6-7/06/2013 Nice 3XXXèmes Journées de Microéconomie

Appliquée

“tourism which is economically viable, but does not destroy the resources on

which the future tourism will depend, notably the physical environment and

the social fabric of the host community“

Swarbook [1999]

§ Demand influence on sustainable products’ developmentAccinelli et al. [2007], Brau [2008], Claude, Zaccour [2009], Minciu et al. [2010], Ogonowska, Torre [2013]

Related Literature (1/2)

§ Public policies enhancing the actors to implement ecologically

responsible measures and amenitiesAccinelli et al. [2007], Accinelli et al. [2008], Brau [2008], Caserta, Russo [2002], Claude, Zaccour [2009],

Minciu et al. [2010], Rivera [2002], Weaver [2005], Shen, Zheng [2010]

§ Ecological education of market actors and populationHenry and Jackson [1995], Jamal et al. [2011] Nita and Agheorghiesei [2010]

§ Price discrimination in natural reserves ticket pricingBecker [2009], Walpole et al. [2001]

46-7/06/2013 NiceXXXèmes Journées de Microéconomie

Appliquée

§ Tourism activities should assure relationship between the local

community and the tourists Accinelli et al. [2008], Bohdanowicz, Zientara [2009], Bramwell, Lane [1993], Crook [2005], Caserta,

Russo [2002], Swarbook [1999]

§ Tourists’ heterogeneityChoi et al. [2009], Dodds et al. [2010], Fairweather et al. [2005], Hedlund [2011], Laroche et al. [2001],

Lee, Moscardo [2005], Luzar et al. [1998], ], Ogonowska, Torre [2013], Schultz, Zelezny [1999], Schultz

Related Literature (2/2)

Lee, Moscardo [2005], Luzar et al. [1998], ], Ogonowska, Torre [2013], Schultz, Zelezny [1999], Schultz

[2001], Thogersen [2000], Weaver, Lawton [2002

§ Tourism and pollution adverse agentsGiannoni [2009], Kousis [2000]]

“sustainable tourism is an economic development model conceived to improve

the quality of life for the local community, and to facilitate for the visitor a

high-quality experience of the environment, which both the host community

as the visitors depends on“

Bramwell, Lane [1993]

6-7/06/2013 NiceXXXèmes Journées de Microéconomie

Appliquée5

ISSUE

What role do the residents play in the emergence of environmental

and sustainability norms?

Have the proportion and other characteristics of environmentally

conscious tourists an influence on interactions with the residents? conscious tourists an influence on interactions with the residents?

Do these interactions between the service provider and residents

generate spillovers in the nature of provided services?

Method:

optimisation model with heterogeneous tourists

6-7/06/2013 Nice 6XXXèmes Journées de Microéconomie

Appliquée

Model’s framework (1/2)

TouristsTourism Service

Provider

hotel

monopoly

pricesTraditional Responsible

Sustainable or

traditional product

Residents

Workers, locals, craftsmen,

retailers, local authorities

6-7/06/2013 NiceXXXèmes Journées de Microéconomie

Appliquée7

• Wages w

• Reduction cost of

negative tourism’

incidence

Tourists’

expenses z

ic

TouristsTourism Service

Provider

hotel

monopoly

Model’s framework (2/2)

Traditional Responsible

Tourism’ subjective

negative impacts s

Residents

Workers, locals, craftsmen,

retailers, local authorities

6-7/06/2013 NiceXXXèmes Journées de Microéconomie

Appliquée8

More or less

aggressive actions aTourism’ objective

negative impacts o

negative impacts s

Benchmark model (without residents) 1/2

• Evolution of an accommodation service provider (monopoly):

– Offers traditional (polluting) or sustainable tourism product

• n potential tourists differentiated by their sensibility to sustainability

issues:

– “Traditional tourists” interested in traditional products according to their net utility

function: 1

,T

T Tu Pα β= − +function:

with: a – consumer’s propensity to pay (a>0)

b - traditional product’s quality (b>0)

– m (0 < m < n) “environmentally conscious tourists” sensible to sustainability issues and

perceiving traditional products as polluting:

with a’<a

– Service provider’s profits if he serves only traditional tourists’ population:

– Profits while serving the whole population:

1,T Tu Pα β= − +

6-7/06/2013 Nice 9XXXèmes Journées de Microéconomie

Appliquée

2,

S

T Tu Pα β′= − +

1( )( )T n m α βΠ = − +

2( ' )T n α βΠ = +

Benchmark model (without residents) 2/2

• Service Provider adapts to the new segment of demand & offers a

sustainable tourism product

– Utility of traditional tourists:

– Utility of environmentally conscious tourists:

with

– Profits if service provider serves only environmentally conscious population:

1

T

G Gu Pα γ= − +

.α α α′′ ′> >2

,S

G Gu Pα γ′′= − +– Profits if service provider serves only environmentally conscious population:

– Profits when the whole population is served

• TSP never chooses to serve only a fraction of tourists:

• TSP offers to the whole tourists’ population sustainable product if:

6-7/06/2013 Nice 10

2( )

Gm cα γ′′Π = + −

1( )

Gn cα γΠ = + −

( )( ) ( )n m nα β α β′− + < +

( ) ( )m nα γ α γ′′ + < +

( )c

nγ α β α′≥ + − +

XXXèmes Journées de Microéconomie

Appliquée

Residents’ utility

• k – homogeneous residents

• Utility of a given resident:

with and

where:

– w figures the wages and other service providers’ expenses benefiting the residents,

1/ 2,v t d= −

( )t w z= + ( ),d o s= +

– w figures the wages and other service providers’ expenses benefiting the residents,

– z - tourists direct expenses benefiting the residents,

– o - individual perception of objective inconveniences generated by tourism activity,

– s - subjective negative impacts.

• According to their utility function’ components residents may undertake

actions in order to encourage or deter tourism. Their intensity depends

on residents’ utility:

with h>0.

6-7/06/2013 Nice 11XXXèmes Journées de Microéconomie

Appliquée

1/ 2min 0, (( ) )v ta dη = − −

Tourism Service Provider’s decisions

• Extra-wage cost paid to local workers (less productive than non

locals), with figuring normal wage cost. To simplify:

• Protection costs linearly increasing with intensity of actions,

with m>0.

• Cost of reduction of negative subjective incidence of tourism to level

2( ) ( ) ,c s s s sλ− = −

( )p

c a aµ=

( )k w w−

,w w w> 0.w =

ic :s

with

– is impossible to vanish, but may be reduced by few actions in favour of residents

• Service provider’s profits:

with R – service provider’s receipts and d = 0 when only the traditional product is offered

and d = 1 if the other cases.

2( ) ( ) ,ic s s s sλ− = −

6-7/06/2013 Nice 12XXXèmes Journées de Microéconomie

Appliquée

2( ) ( )wR c k w a s sδ µ λΠ = − − − − − −

ic

.s s>

• R and c – given for the service provider;

• o and s – given for the residents’ (type of product provided and

distribution of tourists do not depend on TSP – residents’ interactions)

• Equilibrium triplet

– TSP announces and , which decreases s to level

Equilibrium of TSP – Residents’ game in

partial interaction setting

}{ * * *, ,a w s

*w c– TSP announces and , which decreases s to level

– Game is played sequentially;

– TSP is a leader;

– Game solved by backward induction;

– Stackelberg equilibrium

6-7/06/2013 Nice 13XXXèmes Journées de Microéconomie

Appliquée

*w ic ;s

Proposition 1

– Wages increase sharply when compared to the sensibility of residents’ actions to their

utility;

– Cost of reduction of negative subjective incidence of tourism increases strongly with

the sensibility of this cost to the residents actions;

– Wages decrease only linearly with the tourists expenses.

• It is costly for the TSP to gain residents’ approval and avoid more or less

aggressive actions;

• Avoid location’s disgrace.

6-7/06/2013 Nice 14XXXèmes Journées de Microéconomie

Appliquée

Equilibrium of TSP – Residents – Tourists’

game in global interaction setting

• Distinction of the two subpopulations:

– - optimal number of environmentally conscious tourists

– - optimal number of traditional tourists

• Tourists expenses – function of their total number but also environmental

responsibility:

1m

2m

6-7/06/2013 Nice 15XXXèmes Journées de Microéconomie

Appliquée

responsibility:

where and are positive constants.

• Objective negative tourism’ impact – function of tourists’ number:

where is a positive constant.

• Subjective negative tourism’ impact increases only with traditional

tourists:

1 2 1( ) ,z m m mζ ζ ′= + +

ζ ζ ′

1 2( ),o m mω= +

ω

2.s mσ=

TSP Profits

• TSP chooses to provide the whole tourists’ population or one of

subpopulations with one or the other product:

with:

1 2 1 2max , , , ,

t t g gπ π π π π =

2

1 1 2( 0, )max ( )( ) ( 0, ) ( ( ) )t

w s sn m kw a m m n m n m sπ α β µ λ σ

≥ ≥= − + − − = = − − − −

and

6-7/06/2013 Nice 16XXXèmes Journées de Microéconomie

Appliquée

2

2 1 2( 0, )max ( ) ( , ) ( ( ) )

tw s s

n kw a m m m n m n m sπ α β µ λ σ≥ ≥

′= + − − = = − − − −

1 1 2( 0)max ( ) ( , 0)

gw

m kw c a m m mπ α γ µ≥

′′= + − − − = =

2

2 1 2( 0, )max ( ) ( , ) ( ( ) )

gw s s

n kw c a m m m n m n m sπ α γ µ λ σ≥ ≥

= + − − − = = − − − −

( )1/ 2

1 2 1 1 2min 0, ( ( ) ) ( )a w m m m m m sη ζ ζ ω ′= − + + + − + −

Results

6-7/06/2013 NiceXXXèmes Journées de Microéconomie

Appliquée17

Results & Further research

• Interactions with residents’ integration has a double impact:

1. Limits the number of tourists;

2. Accelerate or slow down the adoption of environmental norms:

– Accelerating forces dominate – residents have a better perception of products and

tourists respectful of local culture and environment.

– But when objective negative impacts dominate the others, it is more profitable to– But when objective negative impacts dominate the others, it is more profitable to

provide traditional tourists only with traditional product.

• Further research:

– Possibility of discrimination among agents composing one or another

subpopulation;

– Oligopoly/competition setting (optimal firms’ number), Salop circle framework

– Confirm or infirm the results statistics/data analysis.

6-7/06/2013 Nice 18XXXèmes Journées de Microéconomie

Appliquée

Residents’ Influence on the Adoption of

Environmental Norms in Tourism

Malgorzata OGONOWSKA & Dominique TORREMalgorzata OGONOWSKA & Dominique TORREMalgorzata.Ogonowska@gredeg.cnrs.fr

Dominique.Torre@gredeg.cnrs.fr

Université de Nice – Sophia Antipolis, France

GREDEG - CNRS

Merci!