Estimating net benefits of recreation under conditions of excess demand

Abstract

The public provision of outdoor recreation necessitates the development of nonmarket measures of the value of resources in recreational use. Such values can be used as surrogates for market values in the decision-making process. Another aspect of recreation as a publicly provided good is the absence of a mechanism to eliminate automatically excess demand. The absence of such a mechanism has resulted in conditions of excess demand at many recreation sites. This paper deduces the implications of excess demand for the travel cost method of benefit estimation. We show that when excess demand results in rationing at a particular site, the travel cost method will underestimate the true benefits of the site. The results are important because they help identify the direction of bias of one measure of the benefits from the use of a natural resource.