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Abstract
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.