Price discrimination as a policy tool for Nature Reserve Management.

Becker, Nir (2007): Price discrimination as a policy tool for Nature Reserve Management. Published in: Tourism Economics , Vol. 1, No. 15 (29 January 2009): pp. 193-213.

Abstract

The issue of pricing nature reserves becomes more relevant as budgetary constraints become a limiting factor for their proper operation. This paper considers and compares different pricing alternatives for managing Nature Reserves (NRs) and applies them to two nature reserves in Israel. We compare 4 pricing strategies: Free entrance, maximum revenue pricing, cost recovery pricing and differential pricing. These strategies were implemented to both the existing situation and to a development scenario in which an upgrade in the Nature reserve is considered. The analysis was implemented on two nature reserves in Israel: Darga Nature Reserve (DNR), an open reserve where no entrance fee is charged, and Gamla Nature Reserve (GNR), a closed reserve, where an entrance fee is charged. Benefits were derived using the Travel Cost Method (TCM). Results show that differential pricing is the most cost effective policy. It recovers costs in both policy scenarios with the least dead weight loss (DWL). The consequence of the differential pricing however, is that there is a cross subsidy of the Gamla NR in 45 – 80 percent depending on the scenario analyzed. It was shown that there are conditions in which only a cross subsidy can make a development plan sustainable. Usually, policy makers differentiate pricing according to the characteristics of the visitors. That is, different prices are determined for domestic and international visitors, the elderly and the young, etc. Differential pricing among different reserves provides another tool for policy makers that can be consistent with cost recovery while minimizing DWL. Another potential advantage is that site differentiating causes less social tension due to the pricing being tailored not to a person, but rather to a site.

• Item Type: MPRA Paper
• Language: English
• Keywords: Nature reserves, Pricing, Cost benefit analysis
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q26 - Recreational Aspects of Natural Resources

References

Adams, R.M., O. Bergland, W.N. Musser, S.L. Johnson and L.M. Musser (1989). "User Fees and Equity Issues in Public Hunting Expenditures: The Case of Ring-necked Pheasant in Oregon". Land Economics 65 (4): 376 – 385.

Becker, N. and Y. Coresh (2007). Darga River Nature Reserve Report. Internal report submitted to the Nature Protection Agency, Jerusalem, Israel.

Brent R.J. (1995). "Cost Benefit Analysis, User Prices and State Expenditures in India." Public Finance. Vol. 50: 327 – 341.

Cesario, F.J., (1978). "Value of Time in Recreational Benefit Studies." Land Economics. Vol. 52(1): 32 – 41.

Chase, L.C., D.R. Lee, W.D. Schultze and D.J. Anderson (1998). "Ecotourism Demand and Differential Pricing of National Park Access in Costa Rica." Land Economics 74 (4): 466 – 482.

Cullen, R. (1985). "Rationing Recreation Use of Public Land". Journal of Environmental Management. Vol. 21: 213 – 224.

Dolan, R.J. (1995). "Do You Know When the Price is Right?" Harvard Businness Review. Sept. – Oct.: 174 – 183.

Fractor, D.T. (1982). "Evaluating Alternative Methods for Rationing Wilderness Use". Journal of Leisure research. Vol. 14: 341 – 349.

Eagan, K. and J. Herriges (2006). "Multivariate Count Data Regression Models with Individual Panel Data from an On-site Sample." Journal of Environmental Economics and Management. Vol. 52: 567 – 581.

Fleischer A. and Y. Tsur (2000). "Measuring the Recreational Value of Agricultural Landscape." European Review of Agricultural Economics. Vol. 27(3): 385 – 398.

Grant A.H. and L.A. Schlesinger (1995). "Realize your Customers' Full Profit Potential". Harvard Business Review. Sept. – Oct.: 59 – 72.

Green, W.H. (2000). Econometric Analysis. Ch. 20: Limited dependent variables and duration models. NJ, USA.

Hellerstein, D. (1992). "The Treatment of Non-Participants in Travel Cost Analysis and Other Demand Models." Water Resources Research. Vol. 28(8): 1999 – 2004.

Herath G. (2004). "Issues Surrounding Entrance fees as a Suitable Mechanism for Financing Natural Areas in Australia." International Journal of Wilderness 6 2): 35-38. Herath, G. and J. Kennedy. (2004). "Estimating the Economic Value of Mount Buffalo National Park with the Travel Cost and Contingent Valuation Method." Tourism Economics. 10 (1): 63 - 78.

Kirkpatrick, C.H. (1979). "Distributional Objectives and the Optimum Level of Road User Charges in Developing Countries: Some Results from Kenya". Manchester School of Economics and Social Studies. Vol. 49: 139 – 159.

Knapman, B. and N. Stoeckl (1995). "Recreation User Fees: An Australian Empirical Investigation." Tourism Economics 1: 5-15.

Krutilla, J. (1967). "Conservation reconsidered." American Economic Review 57(4): 777 – 786.

Laarman, J.G. and H. M. Gregersen (1996). "Pricing Policy in Nature Based Tourism." Tourism Management 17(4): 247 – 254.

Loomis, J.B. (2000). Economic Values of Wilderness Recreation and Passive Use: What we think we Know at the Beginning of the 21st Century. USDA Forest Service Proceedings RMRS – P – 15 – Vol. 2: 4 – 13.

McKean J.R., Johnson, D.M. and Walash, R.G.(1995). "Valuing Time in Travel-Cost Demand Analysis: An Empirical Investigation." Land Economics 71: 96-105.

Mendes, I. (2002). "Pricing Recreation Use of National Parks for more Efficient Nature Conservation: An Application to the Portuguese Case." European Environment. 13(5): 288 – 302.

Morisson, S.A., (1982). "The Structure of Landing Feesat Uncongested Airports". Journal of Transport Economics and Policy. Vol. 16: 151 – 159.

Musgrave, R.A. and P. B. Musgrave (1984). Public finance in theory and practice. New York: McGraw – Hill.

Navrud, S. and E.D. Mongatana (1994). "Environmental Valuation in Developing Countries: The Recreational Value of Wildlife Viewing." Ecological Economics. Vol. 11 (2): 135 – 151.

Ramsey, F.P., (1927). "A contribution to the theory of taxation". Economic Journal 37: 47 – 61.

Rosenthal, D.H., J.B. Loomis and G.L. Peterson (1984). "Pricing for Efficiency and Revenue in Public Recreation Areas". Journal of Leisure research. Vol. 16(3): 195 – 208.

Sibly, H. (2001). "Pricing and Management of Recreational Activities Which Use Natural Resources." Environmental and Resource Economics 18 (3): 339 – 354.

Tobias, D. and R. Mendelshon. 1993. "Valuing Ecotourism in a tropical rain-forest reserve." Ambio, 20: 91 – 93.

USDA (2001). Recreation Fees in Wilderness and other Public Lands: An Anotated Reading List. USDA, Forest Service. General Technical Report RMRS – GTR – 79 – Vol. 3.

Van Sickle K, Eagles P (1998). "Budgets, pricing policies and user fees in Canadian parks’ tourism." Tourism Management 19 (3): 125-135.

Walpole M.J., H.J. Goodwin and K.G.R. Ward (2001). "Pricing Policy for Tourism in Protected Areas: Lessons from Komodo Park, Indonesia." Conservation Biology 15 (1): 218 – 227.

Walsh, R.G., G.L. Peterson and J.R. Mckean (1989). "Distribution and Efficiency Effects of Alternative Funding Methods". Journal of Leisure Research 21 (4): 327 – 347.

Ward, F.A. and D. Beal (2000). Valuing Nature with Travel Cost Models. Edward Elgar, Cheltenham.

Willis K.G, (2003). "Pricing Public Parks." Journal of Environmental Planning and Management 46 (1): 3–17.