An Examination of Utility Consistent Approaches to Modeling Corner Solutions in Recreation Demand

EPA Grant Number: R826615
Title: An Examination of Utility Consistent Approaches to Modeling Corner Solutions in Recreation Demand
Investigators: Herriges, Joseph A. , Phaneuf, Daniel J. , Kling, Catherine L.
Institution: Iowa State University
Current Institution: Iowa State University , North Carolina State University
EPA Project Officer: Chung, Serena
Project Period: September 1, 1998 through August 31, 2001 (Extended to October 31, 2000)
Project Amount: $134,759
RFA: Decision-Making and Valuation for Environmental Policy (1998) RFA Text |  Recipients Lists
Research Category: Environmental Justice

Description:

Recreation demand models are used extensively to value existing recreation facilities, as well policies that change the quality attributes and number of recreation sites. However, currently popular modeling frameworks such as those that link a site selection model with a separate participation equation, while providing useful insight into the recreation usage, are hampered by the lack of an underlying utility theoretic framework. The Kuhn-Tucker model, as well as its dual counterpart, provides a promising alternative approach that unifies the site selection and participation decisions in a utility theoretic framework. These models provide a consistent treatment from the behavioral model to the estimating equations. Unfortunately, there has been only limited experience with either of these models to date. The proposed research project is aimed at expanding both our understanding of these models and procedures that will facilitate their use in applied welfare analysis.

Approach:

The proposed research project will

  • Investigate modeling, specification, and econometric issues associated with utility consistent corner solution models in recreation demand.
  • Compare traditional approaches of modeling recreation demand to the utility consistent methods.
  • Apply these utility consistent methods to data sets describing recreation use of the Wisconsin Great Lakes Region and Iowa Wetlands..

Expected Results:

It is anticipated that the research will provide three specific benefits. First, by relaxing both the functional form used to represent individual preferences and the error structure employed to capture variation in preferences, we will expand the range of preferences that the Kuhn-Tucker model can accurately reflect. Second, our Monte Carlo simulation efforts will provide a better understanding of the tradeoffs between established methods for modeling recreation demand, which rely on standard econometric techniques, and the utility consistent approaches, which present greater (but feasible) challenges in terms of estimation. The simulation exercise will also provide insight into the robustness of Kuhn-Tucker and dual models to changes in modeling assumptions. Finally, while Monte Carlo exercises are useful in examining the performance of a model or estimator over a range of underlying conditions and in a controlled setting, they are often criticized for avoiding real world problems. The application of both the Kuhn-Tucker and dual models to two data sets the will provide insights into the problems encountered in actual valuation settings. The wetland valuation effort, in particular, is of current policy relevance, given proposed federal and state changes to the number and quality of wetlands in the Midwest.

Publications and Presentations:

Publications have been submitted on this project: View all 16 publications for this project

Journal Articles:

Journal Articles have been submitted on this project: View all 7 journal articles for this project

Supplemental Keywords:

recreation demand, water, non-market valuation, wetlands., RFA, Economic, Social, & Behavioral Science Research Program, Scientific Discipline, Geographic Area, State, Economics, decision-making, Ecological Risk Assessment, Ecology and Ecosystems, Social Science, Economics & Decision Making, ecosystem valuation, belief system, corner solution, decision analysis, decision making, environmental values, non-market valuation, utility consistent approaches, environmental policy, IOWA (IA), Monte Carlo study, Wisconsin (WI), utility consistant approaches, recreational demand, behavior change, behavior model, econometric analysis

Relevant Websites:

http://www.econ.iastate.edu/faculty/herriges/

Progress and Final Reports:

  • 1999 Progress Report
  • 2000 Progress Report
  • Final Report