First Movers, Non Movers and Social Gains from Supporting Entry in Markets for Nature-Based Recreational Goods

In general most nature-based recreational goods and benefits are considered positive externalities of production, as they are usually not subject to trade. So far, a low degree of rivalry among most user groups and legally defined rights has secured these benefits as almost a public good. Yet, the increasing intensity of use and the arrival of new demanding user groups are quickly changing the picture. In some regions, rivalry among user groups is strong, changing the situation to one of a common-pool resource and declining quality of the good. This provides an option for landowners to offer tailored goods and services to specific user groups, offering to improve the quality of their recreational experience against a payment. Using a two-stage game theoretical model, we show that in spite of apparent potential first-mover advantages in this developing market, demand uncertainty and sunk costs may equally well result in widespread presence of non-movers on the supplier side. While most of the first-mover literature analyse the potentials for sustained first-mover gains, we focus on the presence of non-movers. In a simple model, we show that social gains can be made from offering a subsidy towards the sunk costs. The efficient scheme takes into account the underlying first-mover game.

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Scandinavian Forest Economics: Proceedings of the Biennial Meeting of the Scandinavian Society of Forest Economics
2008, 42
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