Imperfect information and tourist's response to natural disasters

Abstract

This study investigates the international behaviour of individuals with imperfect information. We used both local and international tourist data pertaining to Hakone in Japan to focus on two natural disasters: the Great East Japan Earthquake (GEJE) and volcanic activity on Mount Hakone. Hotel guests' responses to these shocks were estimated using smooth local projections. The responses of less‐informed foreign guests differed from those of well‐informed domestic guests. Because of imperfect information, such as sticky information, rational inattention and selected information through news media, the GEJE and its aftermath decreased the number of foreign guests at a rate greater and more persistent than that of domestic guests. Conversely, changes in volcanic alert levels slightly affect foreign guests because of the absence of information (or rational inattention); however, they have negative and persistent effects on domestic guests.