Marginal Cost Pricing and the Efficient Provision of Public Recreation

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Abstract
Supply and demand functions for public campground recreation are derived, and subsequently equilibrated to estimate both the efficient price of campground use and the social costs of diverging from that price. Supply is measured in the short run, and is defined as the marginal agency cost of campground use. Demand is measured using conventional travel cost techniques. The data for both the supply and demand analyses come from four typical USDA Forest Service campgrounds in western Montana. Results indicate that the equilibrium price is considerably below the current price, and that social welfare can be increased by charging the equilibrium price. Shifting to the equilibrium price has significant negative revenue effects on the recreation-providing agency, however, and may therefore not be pragmatically feasible, especially in the current bugdetary debate.