A revealed preference approach to the measurement of congestion in travel cost models

Abstract

Travel cost models are regularly used to determine the value of recreational sites or particular site characteristics, yet congestion, a key site attribute, is often excluded from such analyses. One reason for this omission is that congestion is determined in equilibrium by the process of individuals sorting across sites and thus presents significant endogeneity problems. This paper illustrates this source of endogeneity, describes how previous research has dealt with it using stated preference techniques, and describes an instrumental variables approach to address it in a revealed preference context. We demonstrate that failing to address the endogeneity of congestion leads one to dramatically understate its costs. We apply our technique to the valuation of a large recreational fishing site in Wisconsin (Lake Winnebago) which, if eliminated, would induce significant re-sorting of anglers amongst remaining sites. Ignoring congestion leads to an understatement of the lake's value by more than 50%. r

Heterogeneous Response to Marine Reserve Formation: A Sorting Model approach

“…One of the strengths of this econometric modeling approach is the ability to decompose the estimation into two stages and use the second stage to disentangle agglomeration or congestion effects from the alternative-specific constant (Timmins and Murdock 2007). We can easily imagine both features existing in fisheries.…”

“…We follow the same estimation routine as the one in Murdock (2006) and Timmins and Murdock (2007). The above contraction mapping problem is solved iteratively, in which the fixed point iteration (4) is nested into the maximum likelihood estimator of (3).…”

“…Our approach draws on the industrial organization literature on product differentiation (Berry 1994;Berry et al 1995) and an emerging literature on spatial sorting in public economics Timmins 2005, 2007;Timmins and Murdock 2007). We incorporate observable heterogeneity from the survey data and permit records as interaction terms.…”

Exploring the Spatial Heterogeneity of Individual Preferences for Ambient Heating Systems

“…This may be due to the spatial configuration of such goods and the availability of substitutes [21] or to residential sorting. People's preferences for environmental goods can influence where they choose to live, so that measures of preferences tend to be correlated with measures of environmental quality or with distance to environmental amenities [22]. Recent developments in Geographical Information Systems (GIS) allow researchers to investigate spatial patterns in preferences for environmental goods.…”

Revealed Preference and Effectiveness of Public Investment in Ecological River Restoration Projects: An Application of the Count Data Model

“…Loomis [10] investigated the impacts of dam removal and river restoration at the Lower Snake River in Washington and concluded that the consumer surplus was $310 million. Timmins and Murdock [11], however, analyzed the random utility models of recreation with congestion and found out that ignoring congestion leads to an underestimate of the Lake Winnebago's value by more than 50%.…”