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Travel Cost Model: an example

Travel Cost Model: an example. Sittidaj Pongkivorasin Faculty of Economics, Chulalongkorn University. Total Economic Value. Use Value. Non-Use Value. Option Value. Direct. Indirect. Existence. Bequest. Economic Value. Valuation Method. Indirect. Direct. Benefit Transfer. Market

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Travel Cost Model: an example

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  1. Travel Cost Model: an example Sittidaj Pongkivorasin Faculty of Economics, Chulalongkorn University

  2. Total Economic Value Use Value Non-Use Value Option Value Direct Indirect Existence Bequest Economic Value

  3. Valuation Method Indirect Direct Benefit Transfer Market - Preventive expenditure - Avoidance cost - etc. Surrogate - Travel Cost - Hedonic CVM CM Valuation Method

  4. Concept Ordinary demand curve, p1 CS

  5. Cost/trip trips Travel demand

  6. Travel Cost Model (TCM) • TCM uses the cost of traveling to a site as a means of inferring the recreational benefits which that site provided. • TCM can be used: • to measure the use value of a recreation area or historic site. • to estimate increases in the use value if the site were improved. • Changes in travel cost will cause a variation in the quantity of visits. Observation of these variations across individuals will permit the estimation of demand functions and of the value of the site.

  7. Assumptions • The cost of travel + cost of time are a proxi for recreational value • The “number of visits” which is the decision variable in the model is assumed to be “the trip of equal length” for each visit and each sample. • Visiting the site is assumed for the “single purpose” which is for recreation. • Number of visits to the site and the quality of the site are assumed “complement”. More visits are expected when the quality is improved.

  8. 2 types of TCM • Individual TCM • Zonal TCM • Both shares the same idea…

  9. Individual TCM • Number of visits = q • Cost of a visit = p • Estimate vj = total number of visit. cj = the visit cost xj = all other factors

  10. Steps in estimating a single site model • Define the site to be valued • Define the recreation uses and seasons • Develop a sampling strategy (on-site vs. off-site) • Specify the model (variables asked) • Decide on the treatment of multiple purpose trips (remove, partial) • Design and implement the survey • Measure trip cost (travel, access fee, equipment, cost of time) • Estimate the model (OLS, Poisson) • Calculate access value Source: Markandya

  11. An example Visits/1000 = 300 – 7.755 * Travel Costs

  12. An entrance fee of 10 Euro So now we have two points on our demand curve.

  13. Advantages of TCM • Based on market price • Actual observed behavior • Inexpensive • Easy to interpret

  14. Issues and Limitations • Single purpose trip • Opportunity cost of time • Substitution site • On-site interview  Sampling bias • Need enough distance to make the difference

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