Economic Impact of Travel Advisories
Abstract: In cases of epidemics and disease outbreaks, the Center for Disease Control (CDC) uses a system of travel advisories signaling three warning levels to indicate the severity of the disease in the area of travel. This paper demonstrates empirically that after the placement of at least a level 2 advisory tourism significantly declines. The lack of a demand decrease in lower levels indicates tourists do not respond to public knowledge of disease, but rather to high level government advisories recommending against travelling to the designated location. The paper develops an experimental game theory model to test if travelers respond in a linear fashion to higher levels of a travel warning, or if there exists a structural break point in which they choose not to travel. The results of the experiments are still pending, the current data analysis indicates a break point at the mid-tier level of government travel advisory and ignore the lower tier advisories.
JEL Classification: C22, C79, I18, Z38
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