A Comparative Analysis of the Pricing Systems of Nature Reserves

Abstract

The pricing of nature reserves increases in relevance as budgetary constraints become a limiting factor in their proper operation. The author considers and compares different pricing alternatives for managing nature reserves (NRs) and applies them to two NRs in Israel. He compares four pricing strategies: free entrance, maximum revenue pricing, cost recovery pricing and differential pricing. These strategies were implemented both to the existing situation and to a development scenario in which an upgrade in the NR was considered. The two NRs analysed are the Darga Nature Reserve, an open reserve where no entrance fee is charged, and the Gamla Nature Reserve, a closed reserve where an entrance fee is charged. Benefits were derived using the travel cost method (TCM). The 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 reserve of 45–80%, depending on the scenario analysed. It is shown that there are conditions in which only a cross-subsidy can make a development plan sustainable. Usually, policymakers differentiate pricing according to visitor characteristics. Differential pricing among reserves provides another tool that can be consistent with cost recovery while minimizing DWL. Another advantage is that site differentiating causes less social tension, because pricing is tailored not to a person but to a site.