Tourism Almost Ideal Demand System

The Almost Ideal Demand System (AIDS), introduced by Angus Deaton and John Muellbauer in 1980, is a system of demand equations grounded in consumer theory that models how a budget is allocated across competing goods through their expenditure shares. Applied to tourism, AIDS treats a tourist's total travel budget as allocated across competing destinations (or expenditure categories), with each destination's budget share depending on relative prices and real total expenditure. Because it estimates all share equations jointly and can impose the restrictions implied by economic theory — adding-up, homogeneity, and symmetry — the model yields a consistent set of income (expenditure) and own- and cross-price elasticities, including how destinations substitute for one another. Gang Li, Haiyan Song, and Stephen Witt's dynamic linear AIDS application demonstrated its value for both explaining and forecasting tourism demand.