Tuesday, September 7, 2010

Someone wanna explain the "tourism tax" to me?

On the one hand, I understand the value of marketing - most corporations charge "extra", built into their prices, to cover the cost of a) developing better products (R&D) and b) to inform the world that they should be using product X
On the other hand, charging a tourist fee to promote tourism doesn't make a ton of sense. The marketing value here (the secondary effect) needs to overcome the direct price effect - charging tourists more to come here should reduce the number of tourists who come here. Lord knows there are enough tourist destinations out there to provide competition.
(For those of you who dispute the idea that $14 is enough to make a dent, think on the margin. You need to be sure the elasticity is pretty darn low before the positive marketing effect outweighs the negative price effect)

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