Question

Thailand is one of the most popular locations for Chinese tourists.  There were about 70 thousand Chinese tourists visited Thailand every year.  The competition among Thai tourist agents is very fierce. Some agents continue to cut their prices until the price is zero.  This phenomenon is called “zero-dollar tour package”. At the same time there often news reports that many tourist agents often take the tourists to fake jewelry shops.  Use the theory about market failure to explain this zero-dollar tour package phenomenon.

Topic : market failure

Answer 1

The zero dollar package is a cheap tour package that is offered to the tourists.Though it is named as zero dollar package, the tourist agents put pressure on the tourists into purchasing of expensive products/services in order to extract money from them. The tourist agents make money in the form of commissions and hence all the money fell into the hands of foreign tour operators.

The zero dollar package is a market failure activity.This package doesn't led to the social welfare, as it is a inefficient market. When resources are inefficiently allocated in the market structure, then it is termed as market failure. In this condition, the economic efficiency welfare cannot be maximised and it also shows impact on country's reputation in the global market. The thai tourism industry is facing the market failure by this zero dollar package phenomenon, it also shows the negative affects on the tourism industry. Hence, the government should take effective measures to eliminate such market failure activities.