Understanding tourists’ expenditure patterns: a stochastic frontier approach within the framework of multiple discrete–continuous choices

Abstract

This article analyzes the determinants of tourists’ expenditure behavior through the joint adoption of two microeconometric approaches, namely, the Stochastic Frontier (SF) and the Multiple Discrete Continuous Extreme Value (MDCEV) model. Despite the attention that analysts have dedicated to consumers’ expenditure behavior in recent years, several limitations concerning the role of budget and the phases of money allocation are still affecting the literature on the topic. In this study, the SF is employed to identify the unobserved individual maximum level of spending allotted for a trip. Once estimated, the frontier is included as a travel budget in the utility-maximizing framework of a MDCEV model. The MDCEV approach allows to simultaneously assess two moments characterizing spending decisions. That is, the decision to allocate the budget to several expenditure categories and the decision concerning the amount to allocate to each category. Data adopted for this research is collected by the Swiss Statistical Office (UST) through a representative Household Budget Survey (Haushaltsbudgeterhebung). Data related to Swiss residents’ leisure travel expenditures are investigated; more specifically, the expenditure categories considered in the analysis are Accommodation, Transportation, Shopping and Food & Beverage.

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AP: Introduction, Theoretical background and methodology, Modelling approach, Data, Empirical analysis, Summary and conclusions, Limitations and future research. IS: Introduction, Data, Empirical analysis, Summary and conclusions. RM: Theoretical background and methodology, Empirical analysis

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Correspondence to Andrea Pellegrini.

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Pellegrini, A., Sarman, I. & Maggi, R. Understanding tourists’ expenditure patterns: a stochastic frontier approach within the framework of multiple discrete–continuous choices. Transportation (2020). https://doi.org/10.1007/s11116-020-10083-2

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Keywords

  • Multiple discrete continuous choices
  • Stochastic frontier regression
  • Travel budget
  • Tourist expenditure behavior