Grantee Research Project Results
1999 Progress Report: An Examination of Utility Consistent Approaches to Modeling Corner Solutions in Recreation Demand
EPA Grant Number: R826615Title: An Examination of Utility Consistent Approaches to Modeling Corner Solutions in Recreation Demand
Investigators: Herriges, Joseph A. , Kling, Catherine L. , Phaneuf, Daniel J.
Current Investigators: Herriges, Joseph A. , Phaneuf, Daniel J. , Kling, Catherine L.
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 Period Covered by this Report: September 1, 1998 through August 31,1999
Project Amount: $134,759
RFA: Decision-Making and Valuation for Environmental Policy (1998) RFA Text | Recipients Lists
Research Category: Environmental Justice
Objective:
Recreation demand models are used extensively to value existing recreation facilities, as well as 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 theoretical 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 theoretical 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. This research project is aimed at expanding both our understanding of these models and the procedures that will facilitate their use in applied welfare analysis.
Progress Summary:
Progress on this project over the past reporting period can be divided into four areas. First, we have extended the Kuhn-Tucker model in a number of directions, allowing for: (1) a broader range of correlation patterns among the available recreation sites (using GEV errors), (2) a larger number of sites that can feasibly be modeled (15 versus 4 in our earlier work), and (3) more general preference structures. Computer code has been developed in GAUSS to implement both the estimation of these models and the calculation of welfare effects. Second, much of the existing literature relies on the assumption of weak complementarity (either implicitly or explicitly) to justify the welfare estimates derived from recreation demand models. As the Kuhn-Tucker model does not require the imposition of weak complementarity, the question arises as to what types of welfare are revealed within this framework. We have examined the components of welfare that can be extracted from the Kuhn-Tucker models, identifying both the components of value that are "revealable" from behavior data and potential sources of bias in their estimation. Third, we have estimated the Kuhn-Tucker model using data for both the Wisconsin Great Lakes Region and the Iowa Wetlands, providing estimates of the gains and losses to various policy scenarios (detailed in the publications list). For example, a 20 percent reduction in toxins in the Wisconsin Great Lakes region would result in a welfare improvement on the order of $90 per person per season among the population of anglers. Fourth, we have used the Kuhn-Tucker framework to examine issues of choice set definition (e.g., site aggregation and market scope) in modeling recreation demand. We find that significant differences in welfare measures arise from changing the choice set specification.
Future Activities:
Our future activities will center on further pursuing Objectives 1 and 2 set forth in the project proposal.
Objective 1:
Investigate modeling, specification, and econometric issues associated with utility consistent corner solution models in recreation demand. In particular, we plan to consider various flexible functional forms, the use of index number theory to test for and specify sites and their associated prices, and further generalizations of the error structure. We also will investigate ways of better modeling the opportunity cost of time within the Kuhn-Tucker framework.
Objective 2:
Compare traditional approaches of modeling recreation demand to the utility consistent methods. We already have pursued this objective using data from the Wisconsin Great Lakes region. In the future, we likely will focus on data from the Iowa Wetland Survey, as well as simulated data, for this task.
Journal Articles on this Report : 4 Displayed | Download in RIS Format
Other project views: | All 16 publications | 8 publications in selected types | All 7 journal articles |
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Phaneuf DJ, Kling CL, Herriges JA. Valuing water quality improvements using revealed preference methods when corner solutions are present. American Journal of Agricultural Economics 1998;80(5):1025-1031. |
R826615 (1999) |
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Phaneuf DJ. A dual approach to modeling corner solutions in recreation demand. Journal of Environmental Economics and Management 1999;37(1):85-105. |
R826615 (1999) |
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Phaneuf DJ, Kling CL, Herriges JA. Estimation and welfare calculations in a generalized corner solution model with an application to recreation demand. The Review of Economics and Statistics 2000;82(1):83-92. |
R826615 (1999) R826615 (2000) R826615 (Final) |
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Phaneuf DJ, Herriges JA. Choice set definition issues in a Kuhn-Tucker model of recreation demand. Marine Resource Economics 1999;14(4):343-355. |
R826615 (1999) R826615 (2000) R826615 (Final) R825310 (Final) |
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Supplemental Keywords:
wetlands, water, watersheds, cost benefit, nonmarket valuation, modeling, recreation demand., RFA, Scientific Discipline, Economic, Social, & Behavioral Science Research Program, Geographic Area, State, Economics, Ecology and Ecosystems, decision-making, Ecological Risk Assessment, Economics & Decision Making, Social Science, ecosystem valuation, belief system, corner solution, decision analysis, decision making, environmental values, non-market valuation, utility consistent approaches, IOWA (IA), environmental policy, Monte Carlo study, Wisconsin (WI), utility consistant approaches, behavior change, recreational demand, behavior model, econometric analysisRelevant Websites:
The following Web sites contain a number of downloadable working papers related to this project: http://www.econ.iastate.edu/faculty/herriges/
Progress and Final Reports:
Original AbstractThe perspectives, information and conclusions conveyed in research project abstracts, progress reports, final reports, journal abstracts and journal publications convey the viewpoints of the principal investigator and may not represent the views and policies of ORD and EPA. Conclusions drawn by the principal investigators have not been reviewed by the Agency.