Business Idea

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If you looked at this remarkable graph from Richard Hatfield’s very interesting paper (also mentioned in this post), it was clear that the local population in Africa was the loser, and the international community, the winner, in terms of benefits. So, how can a large consumer surplus be converted into a producer surplus?

One solution would be to increase visitors’ fees or park fees, but by how much? In these particular forests, visits to observe the gorillas are strictly limited. Price discovery is difficult. Some weekdays may be more popular than others, and the dry season more popular than the rainy season. A visitor may be a local high school student, a backpacker, or a tourist arriving in a private jet. They have very different have different price-sensitive characteristics.

One solution could be a dynamic pricing system using an on-line auction model. This is how prices are set, e.g. by Google AdWords. Airlines and hotels use yield management systems that are more or less based on auctions.

How could an NGO or a company use this business idea to generate more money for conservation? The traditional thing to do would have been to get one client to pay for the development of the software application while retaining the intellectual property rights, and then resell the application to other clients. Given the worldwide interest in the environment, an open source software development model could work. The difficult part of this project is not just software development, the problem is sales, implementation, and support in remote areas. An organization that could do that in a professional manner could occupy an interesting market niche.

The market is probably extremely limited right now, but as the ever increasing number of tourists cause more damage to more protected areas, rationing will become more common. There are already limits to the numbers of visitors on the Galapagos Islands and in the Ngorongoro Crater.

Of course, maximizing income from park fees is not the same as maximizing income for the local population, but that is another story.

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