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A theoretical analysis of preference matching by tourists and destination choice Amitrajeet A. Batabyal1   · Seung Jick Yoo2 Received: 28 January 2020 / Accepted: 7 May 2020 © The Japan Section of the Regional Science Association International 2020

Abstract How does the phenomenon of preference matching by tourists affect their choice between two possible destinations? We study this question. It costs less (more) to vacation in destination A(B). Tourists choose to either vacation in A or B. They differ in their incomes. These incomes are uniformly distributed on the unit interval. Our analysis leads to four results. First, when the cost differential parameter satisfies a particular condition, both destinations are visited in the equilibrium. Second, when this parametric condition holds, in any equilibrium in which the mean income of the tourists varies across the two destinations, every tourist vacationing in A has a lower income than every tourist vacationing in B. Third, there exists an income cutoff point and all tourists with lower (higher) incomes choose to vacation in A(B). Finally, in the equilibrium with income sorting, it is possible to make all tourists better off by modifying their destination choices. Keywords  Destination choice · Income · Preference matching · Tourism · Uncertainty JEL Classification  L83 · D81 For their helpful comments on a previous version of this paper, we thank the Editor-in-Chief Yoshiro Higano, two anonymous reviewers, and participants in a Regional Science Academy Workshop in Kurume, Japan, in September 2019. This research was supported by the Ministry of Education of the Republic of Korea and by the National Research Foundation of Korea (NRF-2016S1A3A2925230). In addition, Batabyal acknowledges financial support from the Gosnell endowment at RIT. The usual disclaimer applies. * Seung Jick Yoo [email protected] Amitrajeet A. Batabyal [email protected] 1

Department of Economics, Rochester Institute of Technology, 92 Lomb Memorial Drive, Rochester, NY 14623‑5604, USA

2

Department of Climate and Environmental Studies, Sookmyung Women’s University, 100 Cheongpa‑ro 47‑gil, Yongsan‑gu, Seoul, Republic of Korea



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Asia-Pacific Journal of Regional Science

1 Introduction 1.1 Literature review Our paper focuses on some key issues that lie at the interface of the trinity of income, tourism, and destination choice. Therefore, before proceeding to the specific objective of this paper, we begin by discussing the existing literature on this trinity in two parts. First, we comment on the nexus between income and tourism. Second, we outline the extant research on the destination choices of tourists. A lot has now been written about the many connections between income and tourism. Looking at the nature and the extent of tourism within the different states of India, Dutta and Kar (2018) point out that the central government can play a major role in promoting tourism by making appropriate income transfers to the states where there has been local unrest. Nassani e