'Should I Stay or Should I Go?': Weather Forecasts and the Economics of 'Short Breaks'

Quaderni - Working Paper DSE N° 1034

20 Pages Posted: 13 Oct 2015

See all articles by Lorenzo Zirulia

Lorenzo Zirulia

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Date Written: October 12, 2015

Abstract

The aim of this paper is to model the decisions of tourists and a monopolist firm when weather forecasts are available. Before deciding whether to go on holiday or not, but after the firm has decided and posted its price, tourists can look at weather forecasts. Our results show that the price chosen by the firm and the corresponding equilibrium profit are decreasing as a function of the accuracy of weather forecasts. Consumers, instead, are better off the more accurate weather forecasts become. Managerial and policy implications are also derived.

Keywords: weather forecast, firm pricing, tourist behaviour

JEL Classification: D83, L12, L83

Suggested Citation

Zirulia, Lorenzo, 'Should I Stay or Should I Go?': Weather Forecasts and the Economics of 'Short Breaks' (October 12, 2015). Quaderni - Working Paper DSE N° 1034, Available at SSRN: https://ssrn.com/abstract=2673455 or http://dx.doi.org/10.2139/ssrn.2673455

Lorenzo Zirulia (Contact Author)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

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