so using their prices as a guide in a pricing decision only compounds irrationality.

However, a major advantage accruing from comparing existing prices with those charged for similar services elsewhere is that it establishes the range of prices which are likely to be acceptable to users of a particular service. It is possible that services may not be exactly the same quality or serve identical types of client groups, but in most cases there are likely to be substantial similarities between services.

Determining the going rate forces an agency to address what potential client groups are willing to pay for a particular service. It is a misconception to believe that costs should necessarily determine price, for often the prices which an agency charges may be used to determine costs. For instance, if a craft program were being priced, an agency might first try to find out what prices it can reasonably expect its potential client groups to pay. When it has this information the agency works backwards from this figure to determine the nature of the materials, equipment and facilities which are suited to such a price.

The going rate price is not "the manager's impression" of what others are charging. It is found by formally surveying what is being charged elsewhere. It may be argued that if the provisional price based on recovery costs in Stage 1 is to be substantially adjusted so it is in accord with the going rate, then Stage 1 may be omitted. This would be a mistake. The going rate often bears little relation to

the cost of provision. As a result, if Stage 1 were omitted, sound financial management would not be possible and substantial inequities between services might emerge as some would be more heavily subsidized than others. Without Stage 1 a jurisdiction would not be able to consciously trade off the opportunity cost of one service compared to another, and would not know whether it should price a service at the high or low end of the range of going rate prices.

STAGE 3: Examine the Appropriateness of Differential Pricing

At the end of Stage 2, the adjusted price is accepted as the average price which service users should be charged. However, Stage 3 recognizes that there are occasions when offering variations of this price to particular groups may achieve more equitable and efficient service delivery (Figure 1).

Examining the appropriateness of differential opportunities means that an agency considers charging a different price to different groups for the same service, even though there is no directly corresponding difference in the costs of providing the service to each of those groups. Such market oriented price adjustments assume that the market is segmentable and the segments show different price elasticities of demand. A fundamental requirement for an agency to be able to offer the same service at two or more prices is that it must not arouse resentment from a majority of clients, or else antipathy will be created and good will lost.

There are six criteria available for dividing a clientele into distinct user groups within which there may be differential pricing opportunities: participant category, product, place, time, quantity of use, and incentives to try. Although each is discussed separately, there are sometimes opportunities to use some of them together.

Price differentiation on the basis of participant category is usually related to a perception that some groups may find it difficult to pay a recommended price. Three groups are frequently identified as being less able to pay. They are children, senior citizens, and the economically disadvantaged. Differentials for each of these groups are widely used by recreation and park agencies, although the rationale for offering services at a reduced price to senior citizens has been challenged in recent years because of the elderly's substantially improved economic status."

Differential pricing on the basis of product may be used to offer client groups extra levels of service, for example, in park maintenance, or by lighting sports facilities. The agency would provide a basic level of service at a designated price, but those clients who wanted a higher level could receive it by paying a higher price. The prices for these added services would be set to cover the incremental costs of providing them.

Pricing that differentiates on a place basis is commonly practiced at spectator events. For example, at a concert, theater or sports event a higher price is charged for front-row than for back-row seats.

The most common use of price differentials based on place relates to higher prices charged to nonresidents. Such differentials are relatively easy to impose since non-residents are likely to have relatively little political influence outside their own jurisdiction. The rationale for such pricing is that residents frequently pay at least some of the costs associated with a service through their property taxes, while non-residents make no such payments. This rationale may not be appropriate if services are paid for from other tax sources, for example a sales tax. In this case, people living outside the community may legitimately argue that since they purchase a variety of goods from within the community, they have contributed their fair share of sales tax. Hence, there is no rationale for charging them more than residents for use of these services.

At the municipal level, the authority of agencies to impose differential prices based on residence varies between states. As a result, such agencies must be aware of relevant statutes and court decisions in their particular jurisdictions to determine their authority to impose a different price for non-residents.

If a service is being used to capacity, then a high differential price may be an effective method of discouraging non-resident use. However, if a service has spare capacity, then an agency may want to attract as many outside residents as possible who are willing to pay a price which is higher than the variable cost of servicing them. The revenue accruing from

this price will make a contribution to fixed costs and so the service will require less subsidy from taxpayers.

The major problem in establishing differential prices for nonresidents is implementation. In those situations in which a client has to show proof of residence each time a service is used, then the irritation of nuisance cost to local residents required to do this may offset any financial gain. This problem does not exist when proof of residence must only be established periodically. Most states, for example, charge substantially higher annual hunting and/or fishing license fees to non-residents than to residents. Proof of residence, in the form of a driver's license or similar document must only be provided by residents once each year.

In using differential prices on a time basis, lower prices are charged for services that are identical except with respect to time of use, in order to encourage fuller and more balanced utilization of capacity. The intent is to encourage use of services at off-peak times and to ration use during peak times.

Quantity discounts are deductions from the regular price that reflect economies of purchasing in large quantities. The most common form of quantity discount used by park and recreation agencies is the season or multi-use pass offered at facilities such as swimming pools, golf courses, and art complexes. Their use has been challenged as being inequitable in some recreation and park situations, but in others their use may be an impor

tant part of overall marketing strategy. The basic purposes of a quantity discount are (1) to stimulate additional demand, and (2) to reduce the costs of meeting that level of demand. If these two conditions are not met, then an agency should reconsider its use of quantity discounts.

Price discounts can be used as an incentive to persuade people to try a service. New clients may be offered prices lower than those paid by established patrons in the hope of encouraging them to become regular users. It is important that such discounts be selective. Those receiving the discounts should recognize that they are for a limited duration or restricted to a particular set of circumstances, and that after a given time period or change of circumstances the regular price will be charged.

Concluding Comments

The systematic approach to deriving a price which has been presented here has to be tempered with a realization that there are two factors which may cause elected officials and potential client groups not always to respond positively to rational pricing decisions. First, a logically derived price may have to be adjusted to accommodate the psychological reactions of targeted client groups. Their reaction to price changes are often irrational stemming from historical perspectives, analogous experiences, self-interest, or emotion. These psychological dimensions have been addressed by the author elsewhere."

A second qualifying factor is the prevailing political environment which surrounds any pricing decision. Pricing is one of the most technically difficult and politically sensitive areas in which recreation and park managers have to make decisions. Pricing decisions are influenced by a myriad of ideological, political, economic, and professional arguments. However, the debate which accompanies this diversity of perspectives should be focused upon sound principles.

The main failure of existing user price policies is that they have been designed solely or primarily to raise revenue. The prevailing approach is to raise all prices by some arbitrary percentage amount each year. There is little attempt to discover who is benefitting, who is paying, and the level of benefits and payments involved for each service. Even if incremental price increases are based on some acceptable criterion, they assume that the original price was appropriate. If the initial price was arbitrarily derived, then subsequent incremental increases are also likely to result in an arbitrary price.

The reasoned, rational approach discussed here will not always be immediately convincing to decision makers. However, the political and rational approaches to pricing are not mutually exclusive. The introduction of better information is not likely to lead to a diminishment of the elected official's voteindeed, it should strengthen it. If a rational approach is not presented to elected officials, then it can only encourage continuation of irrational pricing and imply recogni

tion of their determining those who pay and those who benefit according to whatever personal or arbitrary criteria they care to adopt.

1. Robert D. McRae, "The Cost-Burden Study: A Method for Recovering Costs from Non-residents, Governmental Finance, March 1982, p. 9.

2. Ross C. Kory and Philip Rosenberg, "Costing Municipal Services," Governmental Finance, March 1982, p. 22.

3. John L. Crompton, "The Equitability of Full-Price Policies for Senior Citizens," Journal of Park and Recreation Administration, Vol. 2, No. 1. January 1984.

4. John L. Crompton, Treating Equals Equally: Some Abuses of a Basic Principle in Pricing Public Recreation and Park Services, Parks and Recreation, September 1984.

5. John L. Crompton, Psychological Dimensions of Pricing Leisure Services, Recreation Research Review, October 1982.

John L. Crompton is Associate Professor, Department of Recreation and Parks, Texas A&M University.

Revenue Management in the National Park Service by Lynne Nakata

Revenue management in the National Park System is not new. Fee collection, for instance, actually predates the 1916 establishment of the National Park Service (NPS). Mount Rainier was collecting fees as early as 1908. By 1915, Sequoia/Kings Canyon, Crater Lake, Glacier, Yosemite, Mesa Verde, and Yellowstone/Grand Teton parks had followed suit.

When the National Park Service was established, Director Stephen Mather testified before Congress that park entrance fees and other revenues would eventually be sufficient to cover all National Park Service operation and maintenance costs. He believed Congress would only have to appropriate funds for acquisition of additional lands and construction projects.

It has become increasingly expensive and challenging to provide the high quality public recreation areas and facilities which most Americans have come to expect and deserve. In fiscal year 1983, the cost of operating and maintaining the national park system totaled $567.7 million. Recreation fees collected in 1983 (approximately $21 million) represent only 3.7 percent of the operating budget. Use of recreation areas and facilities and the costs of providing them have grown at a greater rate than the funding available for maintaining, refurbishing, and improving those areas and facilities.

Today, most users pay little more than their taxes for their use of national parks. A pass (Golden Eagle Passport) for admission to all the national parks with an entrance fee costs ten dollars for a carload of people for an entire

Charging a fee to visit a national cemetery, battlefield site, or significant historic site may be

year. This fee has not been adjusted for inflation since 1971. Campsites at some of the most scenic spots in America go for five to eight dollars a night. A commercial pack trip or wilderness school which receives hundreds of dollars in fees from each client may pay as little as fifteen cents per person per day for the use of the public lands which in fact make the trip itself possible and desirable.

To adjust for some of these inequities and to let fees rise to a fair level, the National Park Service in 1983 initiated a revenue management planning program in response to a Secretary of the Interior directive. The goal of revenue management planning is to "maximize the income to the service from users and donors, consistent with the recreational resource protection mission of individual NPS units."

The intent is to explore the range of services that might qualify for user fees, and to consider any changes in fees for existing services and any options for private sector support. Each park unit was asked to thoroughly assess and upgrade

its revenue programs.

The parks submitted their pro

posed strategies in the form of revenue management plans. Some of the favored revenue enhancement strategies include: