Evaluating Evaluating Recreational Benefits Recreational Benefits of Water Resources of Water Resources

on Small on Small Geographical AreasGeographical AreasAn Application to Rivers in An Application to Rivers in

Puerto RicoPuerto RicoPrepared by: Prepared by:

Juan Marcos González & John B. Juan Marcos González & John B. LoomisLoomis

Dept. of Agricultural and Resource Dept. of Agricultural and Resource EconomicsEconomics

Colorado State UniversityColorado State University

OutlineOutline

Recreation Demand ModelsRecreation Demand Models Travel Cost ModelTravel Cost Model Contingent Valuation ModelContingent Valuation Model

Travel Cost Models: A closer lookTravel Cost Models: A closer look Empirical ApplicationEmpirical Application ResultsResults Implications: Water Resources Implications: Water Resources

ValuationValuation Concluding RemarksConcluding Remarks

Recreation ModelsRecreation Models

Travel Cost Model (TCM)Travel Cost Model (TCM) Revealed Preferences Revealed Preferences Relates intensity of use (number of Relates intensity of use (number of

trips) to variables of interesttrips) to variables of interest Allows us to determine a demand Allows us to determine a demand

schedule directly schedule directly Quantity demanded (trips) versus price paid Quantity demanded (trips) versus price paid

(travel cost)(travel cost) Implicitly captures trade-offs between Implicitly captures trade-offs between

characteristics and moneycharacteristics and money

Travel Cost ModelTravel Cost Model

, , ,( )ij j j i ir f p v m z

The individual demand for seasonal The individual demand for seasonal visits to the sites considered is visits to the sites considered is defined as:defined as:

rrijij is the number trips taken in a season by is the number trips taken in a season by

individual individual ii to site to site jj

ppjj is the cost associated to site is the cost associated to site jj

vvjj is a vector of characteristics site is a vector of characteristics site j j hashas

mmii stands for the income stands for the income

zzi i represent a set of particular individual represent a set of particular individual

characteristics of the characteristics of the visitorvisitor

Recreation ModelsRecreation Models

Contingent Valuation Model (CVM)Contingent Valuation Model (CVM) Stated PreferencesStated Preferences Obtains information on contingent Obtains information on contingent

behavior of visitorsbehavior of visitors Relates response to changes in prices Relates response to changes in prices

and site characteristicsand site characteristics Allows us to determine consumer’s Allows us to determine consumer’s

surplus directlysurplus directly

Contingent Valuation Contingent Valuation ModelModel

, , ,( )ij j j i ians f bid v m z

The marginal demand for a visit to the The marginal demand for a visit to the sites considered is defined as:sites considered is defined as:

ansansijij is the answer (yes/no) to the contingent is the answer (yes/no) to the contingent

valuation questionvaluation question

bidbidjj the hypothetical bid amount increase to visit the hypothetical bid amount increase to visit

site site jj

vvjj is a vector of characteristics site is a vector of characteristics site j j hashas

mmii stands for the income stands for the income

zzi i represent a set of particular individual represent a set of particular individual

characteristics of the characteristics of the visitorvisitor

TCM : A Closer LookTCM : A Closer Look

Travel Cost Models Travel Cost Models rely on a continuous rely on a continuous spatial marketspatial market

Each ring is of a Each ring is of a given distance given distance incrementincrement

Visitors residing in Visitors residing in each ring have a each ring have a determined travel determined travel cost to visit the sitecost to visit the site

$4$40000$2$2

5050$1$10000

TCM : The Island EffectTCM : The Island Effect Some sites have Some sites have

limited market area limited market area around them around them (islands) (islands)

The maximum travel The maximum travel cost that a visitor cost that a visitor can incur is limited can incur is limited or truncated or truncated

Travel cost will then Travel cost will then be less than their be less than their maximum maximum willingness to pay willingness to pay

$4$40000

$1$10000

Empirical ApplicationEmpirical Application LocationLocation

El Yunque, Caribbean El Yunque, Caribbean National Forest. National Forest.

SitesSites Visitors from 11 sites were Visitors from 11 sites were

surveyed. surveyed. Espiritu SantoEspiritu Santo Mameyes Mameyes

In person interviewsIn person interviews Interviews were done Interviews were done

during summer 2005.during summer 2005. Included weekdays, Included weekdays,

weekends and holydays.weekends and holydays. Questions included visitor Questions included visitor

demographics, number of demographics, number of visits and perceived site visits and perceived site conditions.conditions.

ResultsResultsVariablesVariables CVMCVM TCMTCM

InterceptIntercept 2.42962.4296 1.22371.2237

4.32234.3223 3.50293.5029

BidBid -0.0104-0.0104 -0.0108-0.0108

-9.2360-9.2360 -5.3192-5.3192

RoadRoad -0.2347-0.2347 0.09200.0920

-2.4443-2.4443 1.56421.5642

Mean Annual DischargeMean Annual Discharge -1.1143-1.1143 0.10550.1055

-2.6580-2.6580 0.90510.9051

Median Grain SizeMedian Grain Size -0.0004-0.0004 0.00020.0002

-2.5237-2.5237 1.97481.9748

Pool VolumePool Volume 0.22000.2200 -0.0182-0.0182

2.34962.3496 -0.6467-0.6467

Pool Volume SquaredPool Volume Squared -0.0083-0.0083 -0.0002-0.0002

-2.0475-2.0475 -0.1325-0.1325

Demand SchedulesDemand SchedulesImplied Demand Curves for Number of Trips for

CVM and TCM

050

100150200250300350400450

0.1

1.2

2.3

3.4

4.5

5.6

6.7

7.8

8.9 10

11

.1

12

.2

13

.3

Number of Trips

Pri

ce TCM

CVM

Implications: Water Implications: Water Resources ValuationResources Valuation

Mean Willingness to PayMean Willingness to Pay

CVM valuation is 18% larger !!CVM valuation is 18% larger !!

CVMCVM TCMTCM

Mean WTPMean WTP $ 109.42 $ 109.42 $ 92.75 $ 92.75

Concluding RemarksConcluding Remarks TCM conditions might not be met by the TCM conditions might not be met by the

area studiedarea studied TCM results are truncated only when the TCM results are truncated only when the

value of the site is greater than the value of the site is greater than the maximum possible travel cost consideredmaximum possible travel cost considered

CVM results might be an alternative to CVM results might be an alternative to evaluate site WTPevaluate site WTP

Water resources valuations depend Water resources valuations depend heavily on the accuracy of the models heavily on the accuracy of the models that usedthat used

Thank you!Thank you!

Questions?Questions?

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