Trip Equivalency for Economic Valuation in Recreation Demand Models: Implications for Compensatory Restoration and Benefits Transfer

Abstract

This paper demonstrates that the number of trips a person takes to a recreation site can be treated as a utility index of value, which has useful implications. We demonstrate that trip counts, taken as a utility index, embody information about site quality, the cost of reaching the site, and substitute sites. The result has practical value for assessing compensatory restoration projects and conducting benefits transfer. The finding is derived from a linear-in-parameters random utility maximization (RUM) model, the “workhorse” of recreation demand modeling, and so inherits the limitations of this model. An empirical analysis based on a marine recreational fishing example shows that the approximation is reliable as long as the number of trips to the site is a small fraction of the total trips to all sites. In addition, we show that the potential magnitude of the error from using the approximation is comparable to the magnitude of the error for estimates of changes in welfare when using alternative travel cost assumptions. We also show (and it follows from the utility index logic) that the inverse of the travel cost coefficient is a “portable” per-trip value that may be used in benefit transfer. Finally, we discuss theoretical and practical limitations. We refer to our result as “trip equivalency.”