NonMarket valuation: Travel Cost

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Non-Market valuationTravel Cost

• Dr John Tisdell

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Readings

• Ward, F.A. and D. Beal (2000). Valuing Nature
  with Travel Cost Models A Manual. Edward Elgar,
  Cheltenham, U.K.Chapter 2.
• Hanley, N. and C.L. Spash (1993). Cost-Benefit
  Analysis and the Environment. Edward Elgar,
  Cheltenham, U.K. Chapter 5.

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Introduction

• Notion
• The basic premise of the approach is that the
  cost of travel is a proxy for the value of a
  recreational site.
• The number or trips and so travel expenditure
  will decrease as distance increases.

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Development

• Hotelling (1947) US National Parks.
• Clawson and Knetch (1966) developed the zonal
  methodology.
• Measurement of cost at a zonal level
• A group from the same area would pay marginally
  more if moved to another zone.
• Development since the 1960s
• Individual travel cost analysis
• Value of time opportunity cost opportunity
  cost of travel time.
• Incorporating multi-site or multi-purpose trips.
• Smith (1971) marginal cost of travel from last
  site. Possible biases.
• Stoeckl (1993) suggested proportioning the cost
  according to perceived importance.
• The effect of substitutes
• Ribaudo and Epp (1984) found strong correlation
  between substitute sites.
• Visit length
• Site quality and recreation congestion

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Individual and Zonal Methods

• Zonal method requirements
• Limited to secondary data trail registrations
  or camping permits.
• The characteristics of the population are the
  same from one distance zone ot another.
• Trips are of uniform duration and for a single
  purpose
• Individuals travel the same distance and time.
• Individual method requirements
• most visitors need to make more than one visit
  per year (time period).
• Data has to be collected from surveys often not
  possible due to budget/time/isolation factors.

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Zonal Method

• Steps
• Collect secondary data on visitor characteristics
• Construct 1st stage demand curve
• Estimate a site demand data
• Construct a 2nd stage demand curve (Resource
  demand curve)
• Convert travel distances to dollars

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• Assume the following camp ground registration
  data were collected from from a site on the
  Darling Downs
• Per Capita Demand for Visitors to a Camp Ground
  on the Darling Downs

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1st stage demand Curve
200
Distance
Warwick
150
Dalby
100
Toowoomba
50
Trips per capita
0.1
0.3
0.2
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Site demand Curve

• The premise of the zonal method is that the
  origins are homogeneous. In other words, if
  someone moved from Toowoomba to Warwick they
  would visit as often as the others living at
  Warwick.

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2nd stage demand Curve
150
Distance added
100
50
Total Trips per year
10000
21000
35000
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Monetary conversion

• Transportation costs
• Federal government rates ( 1.20 per Km)
• Average number in car ( 3 people)
• Travel time
• guidelines suggest accounting for travel time,
  but this is highly correlated with distance
• Combine cost of travel and wages in zonal study
• Assume the average hourly wage rate is 20 and
  cars travel at an average of 50km/hr.

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Estimates

• Distance 50 ((50 x 1.20) (3 x 20.00))/50
  2.40
• Distance 100 ((100 x 1.20) (3 x 20.00))/50
  3.60
• Distance 150 ((150 x 1.20) (3 x 20.00))/50
  4.80

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Aggregate Monetary Demand
Added dollars
4.80
3.60
2.40
35,000
21,000
10,000
Trips per year
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Assumptions

• Single destination trips and zero benefit from
  travel
• Homogeneous demand within zones
• Constant wage rates
• Constant travel times and costs
• Transferable benefit and cost functions

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Next lecture

• Relaxing the assumptions
• Individual travel cost methods
• Empirical examples.