Nature reserve pricing: yes, no, how? The case for the Darga river reserve
Managing nature reserves often necessitates achieving mutually exclusive goals. Ecological goals, social and economic ones, can never be fully realized, and the compromising process should best be handled rationally.
In this work, the problem of upgrading nature reserves and financing their operations is examined. A corollary to this problem is also explored, namely: what should be the pricing mechanism at the reserve’s entrance? This problem encompasses two dimensions: whether to charge entrance fees? And if so, how much? These questions are important in times of budget limitations, and our suggestion is to enhance the use of cross subsidization as a tool to minimize deadweight loss while keeping the budget constraint relevant.
These questions were examined for the Darga River Reserve. In order to examine the viability of improving the park and its operation, both present costs and the costs of upgrading were studied. The difference in costs was then compared to the resulting difference in benefits. It was found that the upgrading process passes the cost-benefit analysis, as the added costs amount to NIS 531,000 and the added benefit is valued at NIS 4.8 million (based on the non-market valuation study presented later).The problem of financing was examined for both present costs as well as for upgraded ones. Four forms of monetization were then analyzed: free entrance, charging entry fees that maximize revenue, charging entrance fees that cover the costs of operation, and differential pricing. To this end, we have also used data from the Gamla Nature Reserve, in order to examine joint management and the potential to cross-subsidize between the two reserves.
It has been found that upgrading of the Darga River Reserve can carry itself financially (i.e., with independent management). A fee of NIS 12.73 at the entrance could cover the added costs, as opposed to NIS 11.50 charged currently (assuming operation costs are met at present state). The reason is that an upgraded park will also attract more visitors.
At the same time, however, financing the upgrading projects using entrance fees only will create a deadweight loss (DWL). Economic desirability versus managerial collaboration is then called into question. In the case of joint management, the DWL is minimized. That is, the surplus of one reserve, say of Gamla, will cover parts of the operating costs of the other, Darga. This cross-subsidization between nature reserves can bring about an improved state of nature conservation while minimizing visitor losses from the excess burden resulting from the improvement project.