Congestion and the Valuation of Recreation Benefits

Abstract

The existence of congestion at outdoor recreation sites gives rise to certain problems in benefits evaluation, especially when demands for facilities are interdependent. Specifically, where additions to recreation capacity via the expansion of existing parks or the development of new ones has the incidental effect of alleviating or exacerbating the congestion at existing facilities, efficiency benefits of the project are not narrowly defined as the area under the demand curve for the new facility. In these cases some relevant increments in surpluses associated with the demand for existing facilities must be taken into account as well. The basic principles of valuation under the above circumstances are developed in this paper under two different assumptions about the pricing policy in effect. The first policy (policy A) assumes that marginal-cost pricing is practiced everywhere (at least in the recreation sector); second best considerations are not considered relevant. The second policy (policy B) assumes the zero-price approach favored in North America.1 It will be shown that implications for investment strategy differ only slightly in respect to these extreme cases. The mixed case is not explicitly considered. Although others have considered various aspects of the recreation congestion problem (Anderson and Bonsor 1974, Burt and Brewer 1971, Cicchetti and Smith 1976, McConnell and Duff 1976, Wetzel 1977) the particular issues taken up here have not been exposed, with perhaps one exception. A paper by Knetsch (1977) correctly points out the conditions under which one does not take into account the effects on existing facilities of introducing a new facility into the system (he ignores congestion).2 Si ce this paper considers the conditions under which one does take into account the effects on existing facilities it can be c nsidered as an extension or complement to Knetsch's work.