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International Handbook on the Economics of Tourism

Edited by Larry Dwyer and Peter Forsyth

This highly accessible and comprehensive Handbook presents a cutting edge discussion of the state of tourism economics and its likely directions in future research. Leading researchers in the field explore a wide range of topics including: demand and forecasting, supply, transport, taxation and infrastructure, evaluation and application for policy-making. Each chapter includes a discussion of its relevance and importance to the tourism economics literature, an overview of its main contributions and themes, a critical evaluation of existing literature and an outline of issues for further conceptual and applied research.
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Chapter 5: Industrial Economics and Pricing Issues within Tourism Enterprises and Markets

Adrian O. Bull


Adrian O. Bull Importance of the issue The conventional view in economics that a product is a scarce good or service, and represents an output resulting from a production process, provides a starting definition for much of tourism. However, such a definition does not provide an adequate description of what constitutes a product from a consumer needs perspective, or an adequate specification of the boundaries of a commodity class. In perfect competition, perfect homogeneity among a number of products automatically defines a commodity class, a market and an industry. In other cases, the boundaries of a commodity class may be defined in theory by reference to the degree of substitutability between objects, but the less substitutable products are, the fuzzier the commodity class boundaries become. Tourism involves a huge range of products, only some of which are substitutable, and therefore the ‘market’ for tourism is in fact fragmented into markets for many products (Leiper 1995: 18–19). Nonetheless, there may be some substitutability between different classes of tourism product; for example, a tourist may trade off expenditure for a poorer class of travel for better accommodation, or vice versa. The degree of substitutability and the cohesiveness of the purchasing group, determine the nature of the market structure within which tourism enterprises operate. Additionally, the tourism experience (product) involves a range of characteristics that may cause problems for a classical analysis of industrial economics and markets within tourism. Pine and Gilmore (1999) note the characteristics...

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