1. Evaluating Recreational Benefits of Water Resources on Small Geographical Areas An Application to Rivers in Puerto Rico Prepared by: Juan Marcos González & John B. Loomis Dept. of Agricultural and Resource Economics Colorado State University

2. Outline Recreation Demand Models Recreation Demand Models Travel Cost Model Travel Cost Model Contingent Valuation Model Contingent Valuation Model Travel Cost Models: A closer look Travel Cost Models: A closer look Empirical Application Empirical Application Results Results Implications: Water Resources Valuation Implications: Water Resources Valuation Concluding Remarks Concluding Remarks

3. Recreation Models Travel Cost Model (TCM) Travel Cost Model (TCM) Revealed Preferences Revealed Preferences Relates intensity of use (number of trips) to variables of interest Relates intensity of use (number of trips) to variables of interest Allows us to determine a demand schedule directly Allows us to determine a demand schedule directly Quantity demanded (trips) versus price paid (travel cost) Quantity demanded (trips) versus price paid (travel cost) Implicitly captures trade-offs between characteristics and money Implicitly captures trade-offs between characteristics and money

4. Travel Cost Model The individual demand for seasonal visits to the sites considered is defined as: r ij is the number trips taken in a season by individual i to site j p j is the cost associated to site j v j is a vector of characteristics site j has m i stands for the income z i represent a set of particular individual characteristics of the visitor

5. Recreation Models Contingent Valuation Model (CVM) Contingent Valuation Model (CVM) Stated Preferences Stated Preferences Obtains information on contingent behavior of visitors Obtains information on contingent behavior of visitors Relates response to changes in prices and site characteristics Relates response to changes in prices and site characteristics Allows us to determine consumer’s surplus directly Allows us to determine consumer’s surplus directly

6. Contingent Valuation Model The marginal demand for a visit to the sites considered is defined as: ans ij is the answer (yes/no) to the contingent valuation question bid j the hypothetical bid amount increase to visit site j v j is a vector of characteristics site j has m i stands for the income z i represent a set of particular individual characteristics of the visitor

7. TCM : A Closer Look Travel Cost Models rely on a continuous spatial market Travel Cost Models rely on a continuous spatial market Each ring is of a given distance increment Each ring is of a given distance increment Visitors residing in each ring have a determined travel cost to visit the site Visitors residing in each ring have a determined travel cost to visit the site $400 $250 $100

8. TCM : The Island Effect Some sites have limited market area around them (islands) The maximum travel cost that a visitor can incur is limited or truncated Travel cost will then be less than their maximum willingness to pay $400 $100

9. Empirical Application Location Location El Yunque, Caribbean National Forest. El Yunque, Caribbean National Forest. Sites Sites Visitors from 11 sites were surveyed. Visitors from 11 sites were surveyed. Espiritu Santo Espiritu Santo Mameyes Mameyes In person interviews In person interviews Interviews were done during summer 2005. Interviews were done during summer 2005. Included weekdays, weekends and holydays. Included weekdays, weekends and holydays. Questions included visitor demographics, number of visits and perceived site conditions. Questions included visitor demographics, number of visits and perceived site conditions.

10. Results VariablesCVMTCM Intercept2.42961.2237 4.32233.5029 Bid-0.0104-0.0108 -9.2360-5.3192 Road-0.23470.0920 -2.44431.5642 Mean Annual Discharge -1.11430.1055 -2.65800.9051 Median Grain Size -0.00040.0002 -2.52371.9748 Pool Volume 0.2200-0.0182 2.3496-0.6467 Pool Volume Squared -0.0083-0.0002 -2.0475-0.1325

11. Demand Schedules

12. Implications: Water Resources Valuation Mean Willingness to Pay Mean Willingness to Pay CVM valuation is 18% larger !! CVM valuation is 18% larger !! CVMTCM Mean WTP $ 109.42 $ 109.42 $ 92.75 $ 92.75

13. Concluding Remarks TCM conditions might not be met by the area studied TCM conditions might not be met by the area studied TCM results are truncated only when the value of the site is greater than the maximum possible travel cost considered TCM results are truncated only when the value of the site is greater than the maximum possible travel cost considered CVM results might be an alternative to evaluate site WTP CVM results might be an alternative to evaluate site WTP Water resources valuations depend heavily on the accuracy of the models that used Water resources valuations depend heavily on the accuracy of the models that used

14. Thank you! Questions? Comments?