Travel cost method
21st Dec 2018
Travel Cost Method
Suitability for the forest ecosystem services to be valued:
Description of the method:
Travel Cost Method derives willingness to pay for environmental benefits at a specific location by using information on the amount of money and time that people spend to visit the location. It is based on the rationale that recreational experiences are associated with a cost (direct expenses and opportunity costs of time). The value of a change in the quality or quantity of a recreational site (resulting from changes in biodiversity) can be inferred from estimating the demand function for visiting the site that is being studied.
This method assumes that the value to the consumer is at least equal to the travel costs the consumer is willing to incur to obtain the desired good or service. Thus, peoples’ willingness to pay to visit the site can be estimated based on the number of trips that they make at different travel costs. This is analogous to estimating peoples’ willingness to pay for a marketed good based on the quantity demanded at different prices.
Benefits of the method:
Similar to more conventional approaches to estimate economic values based on market prices
Based on actual behaviour rather than on hypothetical behaviour of the respondents
On-site surveys provide opportunities for large sample sizes
Results are relatively easy to interpret and explain
Relatively inexpensive to apply
Limitations of the method:
Opportunity costs of time (i.e. the idea that time spent traveling could have been used in other ways) are difficult to determine and might not be empirically observable at all, which requires additional assumptions
Assumption that people respond to changes in travel costs the same way that they would respond to changes in admission price might not always be true
Limited in its scope of application because it requires user participation
Standard approaches provide information about current conditions, but not about gains or losses from anticipated changes in resource conditions
The simplest travel cost models assume that individuals take a trip for a single purpose
The availability of substitute sites will affect values
The modern variants of travel-cost models are known as Random utility/discrete choice models. Random utility models arise from the empirical assumption that people know their preferences (utility) with certainty, but there are elements of these preferences that are not accessible to the empirical observer. Thus, parameters of peoples’ preferences can be recovered statistically up to a random error component. This econometric approach is used to estimate modern travel-cost models.