Consumer Surplus Value Research Articles

The Economic Benefits of Snowmobiling to Wyoming Residents: A Travel Cost Approach with Market Segmentation

Little research has been done on the economic benefits of snowmobiling. This study uses cluster analysis to identify different snowmobiler segments, and then uses the travel cost method to estimate the respective consumer surplus values for the pooled sample and the different market segments. Consumer surplus per trip for the pooled sample is $68 and for the different market segments ranged from $31 to $101 per trip. Differences between the pooled model and segments highlight the importance of differentiating recreational users for both management related issues and for economic benefit measurements.

A review of cost–benefit analysis as applied to the evaluation of new road proposals in the U.K.

The U.K. Department of Transport’s COBA program is used to evaluate proposed highway schemes. COBA compares construction and maintenance costs against the benefits (time savings plus fuel and non-fuel vehicle operating costs plus accident savings) of a highway proposal. COBA does not value environmental externalities of highways developments in monetary terms: externalities such as noise, visual intrusion, recreation loss, air pollution, wildlife, etc., are merely documented in terms if their physical impacts, leaving decision-makers to judge the overall merit of the highway scheme. The paper documents the extent to which various amenity values are incorporated or excluded under current procedures, and the need to incorporate consumer surplus values. The paper also illustrates how the market price of land can be adjusted to reflect its social opportunity cost. Amenity benefits lost as a consequence of new road schemes are seen to mainly comprise loss of amenity value to the general public rather than to the owners of land. The paper argues that these amenity values of lost access; wildlife; and landscape preservation, etc., can be successfully valued through stated preference (SP) and contingent ranking (CR) methods; and that they should be incorporated into a full cost–benefit analysis of alternative route proposals.

Allowing for multiple-site visitors in travel cost analysis

Travel cost analysis is one method of non-market valuation whose application to recreational sites and facilities is widely reported in economic literature. A recurring problem is the treatment of joint-consumption benefits when travel costs are shared between more than one site which, if ignored, would lead to overestimation of the consumer surplus value for the particular site being examined. A search of the literature reveals a variety of modifications to the travel cost method suggested to handle this problem, none of which are universally accepted as unambiguously superior to the others. A feature in common with all these modifications is that they adjust the travel cost variable to account for multiple-site trips, but such adjustments may worsen the predictive ability of the model. They are also only possible when sufficient data are available on visits to other sites, but these data are often difficult to collect when using a single-site questionnaire. This paper describes the application of travel cost analysis to a case study, the evaluation of the economic benefits of Whakapapa Skifield in New Zealand, in which, because of the physical conditions encountered and the peculiarities of visitor patterns, the non-observability of visits to other sites produced acute problems for the analysis. It is suggested that, in such circumstances, an alternative method of allowing for multiple-site visits is to adjust the consumer surplus estimate by using a trip index which relates the site visit to the total time away from home on a trip.

Theory of competitive regulatory equilibrium

The power of the state to regulate the price of a good or service is the power to create a social surplus the difference between social benefits and social costs. The capitalized value of this surplus may be thought of as the 'product' of the law which creates it. We can typically decompose this product into two joint products: The capitalized value of consumer surplus and the capitalized value of producer surplus. The external incentive a regulator faces in his choice of a regulatory policy depends on the willingness of consumer and producer groups to compensate him in return for the surplus they realize. The nature of the compensation (votes, money payments, election support, etc.) as well as its magnitude depend upon the nature of the political system and upon the institutional characteristics of the adversary groups. If competition for the post of regulator exists, the regulator's compensation depends upon his own regulatory strategy vis-A-vis the strategy of an opponent. A competitive regulatory equilibrium will be said to exist if there is a regulatory policy which cannot be defeated by any other. The equilibrium will be said to be unique if there is one and only one policy which satisfies the conditions of competitive equilibrium. If there is a unique competitive regulatory equilibrium, the regulator has no choice about the policy he pursues. If he fails to choose the equilibrium policy, he invites replacement. In this sense, regulatory policy is beyond the control of those who regulate and is determined instead by the ability of regulators to create consumer and producer surplus and the willingness of interested groups to compensate the proponents of policies they prefer. The economic theory of competitive regulatory equilibrium has its roots in the pioneering work of George Stigler (1971). It has been elaborated by Posner (1974) and formalized by Peltzman (1976) and Becker (1983), who presented comparative statics results with empirical implications. These writers take the

A Note on the Functional Form of Travel Cost Models with Zones of Unequal Populations

As Bowes and Loomis (1980) noted in their contribution, for recreation demand functions of a linear form, the existence of unequal zonal populations in travel cost models leads to the problem of nonconstant error variances when observations are expressed on a per capita basis, i.e., when the zone average method is used. For a model with nonhomogeneous variances, the ordinary least squares (OLS) parameter estimates will be unbiased but inefficient. These properties will hold true of the consumer surplus estimates as well. A weighting of the observations is the well-known solution to the heteroskedasticity problem, where in this case the appropriate weighting factor for each observation is the square root of the associated zone of origin's population. While preserving unbiasedness, the weighted least squares (WLS) approach generates parameter estimates that are equivalent to the generalized least squares (GLS) minimum variance estimators. In their application of the travel cost method to recreation trips during 1977 down the Westwater Canyon in Utah, Bowes and Loomis illustrated the efficacy of WLS in predicting recreation trips more accurately than OLS for a linear first-stage demand curve. As in previous studies, the OLS linear regression equation grossly mispredicted the total number of trips taken at the actual price per trip of zero, and seemingly overestimated the value of consumer surplus. Further evidence of this latter finding was obtained in a study of warm water fishing in Georgia by Ziemer, Musser, and

The Economic Significance of the Long Point Marsh, Lake Erie, as a Recreational Resource

Recreation competes with agricultural, residential, and other uses of wetlands and decisions regarding wetland use invariably have been made in the absence of information on the economic significance of wetland recreation. During 1978, data to assess the economic significance of wetlands for recreation were obtained from 703 users of public marsh at Long Point and Point Pelee on the north shore of Lake Erie. The Long Point marsh provided various recreational opportunities including nature viewing, fishing, and waterfowl hunting for over 17,000 users. It is estimated conservatively that these users placed a willingness to pay (consumer surplus) value on the recreation derived of over $213,000 and generated directly and indirectly some $225,000 in local spending on travel, food, accommodation, and other items. The Point Pelee experience demonstrates opportunities for enhancing the recreational and educational value of the Long Point marsh.

Estimating the benefits of recreation under conditions of congestion: Comments and extension

The purpose of this paper is to comment on and extend the analysis of a paper by Wetzel. He uses a commonly accepted model of demand for a congested recreational resource and shows how the Clawson method of estimating a recreational demand curve relates to it. Much of his analysis is useful but he errs in his interpretation of the proper value of consumer surplus. In this paper a specific formalization of the demand model is developed for the first time and it is used to show the correct measure of consumer surplus and how to specify the proper level of use for the congested resource.

Valuing Changes in Regulated Firms' Input Prices

where the Xi are the quantities (assumed positive throughout) of the n inputs employed in production, and F is assumed smooth and well-behaved. Assume that initially all inputs are available in perfectly elastic supply at private and social unit costs (r, . .. , rn). Suppose now that the social cost of the first input changes from r, to (r, + at), while the private cost shifts from r, to (r, + t), and it is desired to compute the Marshallian consumer's surplus value of this shift.1 Problems of this sort arise with some frequency in costbenefit analysis, and regulated firms are often involved. MacAvoy [4], for instance, considered the social value of research lead-

Return to Poultry Research in the United States

Two approaches are used to estimate a rate of return to investment in poultry research. The index-number approach utilizes productivity indexes to measure downward shifts in the long-run poultry supply function in order to estimate the annual value of consumer surplus, or resources saved, resulting from increased efficiency in the production of poultry products. The flow of annual net social returns is then related to the flow of annual poultry research expenditures to derive a rate of return to research. In the production-function approach, state experiment station research is included as a separate variable in an aggregate poultry production function in order to estimate the marginal product of poultry research. The results indicate that past investment in poultry research has been yielding a return of about 20 to 30 percent per year from the date of investment.