Price discrimination as a policy tool for Nature Reserve Management

Nir Becker

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Nature reserves; Pricing; Cost benefit analysis (search for similar items in EconPapers)
JEL-codes: Q26 (search for similar items in EconPapers)
Date: 2007-11-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Tourism Economics 15.1(2009): pp. 193-213

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