Optimal pricing of protected areas under multiple sites demand models

Abstract

This study extends Alpízar's (2006) price discrimination model for protected areas in nature-based tourism from a continuous demand to a discrete choice model. The original model provided a discrimination price solution for national and foreign visitors to a single site choice, limiting the model's application. Meanwhile, our extended model recognizes multiple recreational site options, each with a probability of being selected, including the likelihood of not choosing any site. We illustrate our theoretical model to evaluate the optimal pricing for national and foreign visitors using Peru's two National Protected Areas. The results indicate a significant revenue increase when both sites' entrance fees are optimized. The discrete choice approach, with its flexibility, captures substitution patterns among recreational sites, increasing the realism of the tool for policymakers and park managers. Our model can enhance sustainable nature-based tourism management by aligning discriminatory entrance fees with economic theory to ensure protected areas' long-term viability.