This paper seeks to provide the theoretical underpinnings for the optimal pricing of protected areas used in recreational activities, from the perspective of a local park agency interested in maximizing welfare.
The approach in this paper extends the existing literature on pricing of protected areas by introducing price discrimination between different groups of visitors. This allows for a more efficient adjustment to the distortions imposed by, for example, a cost recovery restriction. Another innovative element in the theoretical model is that, given that the agency charges different prices to different subsets of visitors, the model also includes a distributional dimension that is particularly relevant for a local park agency receiving visitors from different origins or of different nationalities. Finally, I discuss several other issues related to optimal entrance fees, including ecological impacts of increased visitation, the spillover effects of changes in entrance fees on local communities and the treatment of fixed investment costs. Based on this theoretical foundation, the paper provides an estimation of the optimal entrance fees and associated revenues for the Costa Rican National Park System.
