Free Walking Tours: A Game Theoretical Approach

ABSTRACT Free guided walking tours are becoming increasingly common in cities that are popular tourist destinations. We use game theoretical tools to model and analyze the competition between several tour operators competing in one destination. The model consists of two stages: In the first, each operator decides on the level of effort to invest in order to attract tourists to its free tour. This effort includes advertising and marketing, primarily by means of digital platforms and social networks. At the same time, and still in the first stage, each operator decides on the level of effort to invest in the walking tour itself to make it an enjoyable experience for the participants. In the second stage, based only on the effort invested in the tour itself, the participants decide how much to tip. The model generates several theoretical and practical insights into the organization of free tours.