The value of recreational boating at lakes in East Texas

Abstract

The travel cost and contingent valuation methods for estimating the benefits from the consumption of a non-market good are compared. In this study, the non-market good is recreational boating. The recreation benefits are estimated at four lakes in East Texas; Conroe, Livingston, Somerville and Houston, using responses from a questionnaire survey of 2,000 boaters in this region. The demand curves for the four lakes are estimated jointly using the travel cost method. For each lake, the area under the demand curve provides estimates of Marshallian measures of consumer's surplus as an estimate of benefits. Two variations of the contingent valuation method are investigated. One is of open-ended form, the other a close-ended form. A contingent market is posited for an annual boat ramp permit. For the open-ended form, respondents are asked to give the maximum amount they are willing to pay for the ramp permit before giving up using that lake. The willingness to pay responses for each lake are analyzed using a bid curve, expressing willingness to pay as a function of the number of visits and income. This is then differentiated to obtain a Hicksian demand curve. The consumer's surplus calculated from this curve is a Hicksian measure of the recreation benefits. For each lake, in the close-ended form, each respondent answers "Yes" or "No" to paying a suggested price for an annual boat ramp permit. Those responding "No" cannot use this lake. These responses are analyzed using a logit analysis, the probability of responding "No" to the suggested permit price being specified as an increasing function of that price. The average benefit measure from this method is calculated as the area above the estimated logit function up to probability equal to one. The travel cost model is estimated using three costs of travel time. This cost has a considerable influence on the magnitude of the estimated benefit measures. Empirical results suggest that the cost of recreational travel time may be close to zero. The open-ended contingent valuation method appears unreliable, and greatly underestimates recreation benefits. However, the close-ended contingent valuation method and the travel cost method, with time cost equal to zero, give comparable and consistent results.