Quality and Congestion in Environmental Goods: The Road to the Wangapeka
An increasing complaint heard among New Zealand residents is that their enjoyment of local environmental resources is being diminished by increased congestion from foreign visitors. This paper considers a model of vertical differentiation in which foreign high-value and domestic low-value consumers incur congestion costs in using a common resource. We demonstrate that reducing quality in the face of increased foreign demand is optimal absent discriminatory prices (but not otherwise). We also...[Show more]
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