Estimating Travel Cost Model: Spatial Approach

Abstract

High gasoline prices made headlines in 2008 and 2009. The average gasoline price in the United States peaked at $4.05 per gallon in the second week of July, and it remained fairly high most of the third quarter of 2008, dropped significantly through September to December in 2008, and began to rise again in January 2009 (Energy Information Administration, 2009). A survey conducted during June 9–12, 2008 while gasoline prices were rising significantly, shows that 11% of Americans were limiting or cutting back on their travel or vacations due to the rising gasoline prices (Newport, 2009). As the survey results suggest, the effect of rising gasoline prices on consumers’ leisure travel patterns is assumed to be negative due to decreased wealth and disposable income and increased cost (or price) of their travel given a downward sloping demand curve for recreation, if recreation is a normal good. Nonetheless a quantitative estimate of the impact of gasoline prices on leisure travel patterns has not been explicitly explored (Englin, et al., 2003, Heberling and Templeton, 2009, Hesseln, et al., 2003, Martinez-Espineira and Amoako-Tuffour, 2008). The lack of research on the impact of gasoline price on leisure travel patterns may be due to relatively stable gasoline prices during the 80’s and 90’s. The impact of gasoline price on leisure travel patterns has become an important issue because consumer sensitivity to fluctuations in gasoline prices affects travel decisions (Walsh, et al., 2004) and spikes in gas prices can be nontrivial. The travel cost model is often used to measure the benefits provided by access to public recreation sites, e.g., national parks and national forests, which have relatively minor, if any, entrance fees (Oh, et al., 2005). Hotelling (1947) is credited with the initial development of the travel cost model. Using the travel cost model, observed travelers’ net economic benefit, or consumer’s surplus, from visiting a recreation site is calculated as the value of access to the