Abstract:
The travel cost method of deriving demand and value of recreation
does not include fixed costs of recreational durable goods purchases
or allow for supply restrictions on the number of suitable
sites available. The omission of these two real-world situations
results in derivation of demand curves which are more inelastic than
truly exist and, consequently, incorrect estimates of value.
Anglers visit sites based on how far they must travel, the
water quality of the site, and the presence of facilities. These
site characteristics may not be available in adequate supply to meet
demand. If so, a supply restriction will exist such that recreators
must travel farther or settle for less quality. Simple regression
would fit a downward-sloping function through a scatter plot of both
supply and demand which would be steeper than the true demand curve.
In addition, regression is limited in its ability to deal with interaction
of variables and a categorical data set. The loglinear model
for categorical data accounts for variable interactions. Results of
the empirical study of Pacific Northwest recreational fishing demand
and value show that anglers respond to the supply problem rationally
and in accordance with utility theory. The per angler per year
value of improving all average water quality sites to good-excellent
levels was between $8.98 and $34.14, only slightly higher than estimates
of other recent studies. Also, installation of facilities and
water quality improvement at primitive sites of poor-bad water quality
resulted in increased annual benefits of nearly 7000%.
Recreators who purchase durable goods incur fixed as well as
variable costs. The investment reduces household income but also
lowers per trip expenditures. Recreators face two demand curves,
one for owning and one for renting the capital good, where utility
maximization determines which curve will be chosen. Fit of a scatter
by ordinary least squares would estimate a more inelastic demand
curve than either of the demand curve pairs unless ownership
is considered. Errors in policy are inescapable unless corrections
are made. The more capital-intensive the activity, the greater the
distortion should be. An empirical study is suggested to test the
hypotheses of the theory presented.
