Milon, J. Walter

English

Research Papers in Economics

Site Characteristics and Revealed 
Preferences for Outdoor Recreation 
J. Walter Milon 
Demand measurement for outdoor recreation 
has developed on a course that reflects trends 
in both theoretical economics and recreation 
policy. The early insights of Hotelling and 
Clawson and Knetsch express a dominant 
concern with estimating the demand for a 
single recreation site and the economic value 
of publicly provided, new recreation sites. 
Their theoretical framework was consistent 
with the emerging public goods theory which 
viewed recreation sites as homogeneous public 
goods demanded by homothetic consumers. 
In light of the emphasis on expanding leisure 
opportunities and public acquisition of 
recreational parkland in the national recre-
ation policy of this period, their analysis was 
timely and an important benchmark for further 
refinements in measuring the economic value 
of recreation sites (Burt and Brewer; Cic-
chetti, Fisher and Smith). 
In the past decade, the emphasis in recre-
ation policy analysis has shifted from the pro-
vision of new recreation sites to evaluation of 
changes in the characteristics
1 of one or sev-
eral existing recreation sites. Policy issues 
such as water quality management, the provi-
sion of site facilities, and stock density man-
agement for fish and game all require an un-
derstanding of the 'implicit' or partial value of 
these site characteristics. As Stoll has ob-
served, recent insights in economic theory 
have provided a useful conceptual framework 
to consider recreational characteristics. 
Economists have an important role to play in 
providing information about the economic 
value of recreation site characteristics. 
This article provides an overview of alterna-
tive approaches to estimate the value of site 
characteristics using the travel cost approach 
Associate Professor, Department of Food and Resource Econom-
ics, University of Florida, Gainesville, Florida 32611. 
1 'Characteristics' is used as an eclectic term to represent ob-
servable, measurable features of a recreation site. Other terms 
such as attributes and amenities which have been used to describe 
recreation sites are included in the definition of characteristics. 
to recreation demand measurement. Particular 
emphasis is given to the hedonic travel cost 
model as developed by Mendelsohn and 
Brown. This review suggests that considerable 
theoretical and empirical research is necessary 
to develop a model of demand for site charac-
teristics which is consistent with microeco-
nomic theory and can be readily implemented. 
Travel Costs and Site Characteristics 
Following Hueth and Strong, the travel cost 
model can be viewed simply as a consumer 
maximization problem of the form 
(1)  U - U(v,z,y) 
s.t. M = pvv + y 
where v is the number of visits to a particular 
recreation site, z represents characteristics of 
a site, y is all other consumption goods, M is 
income and pv is the price per visit. This prob-
lem has been empirically evaluated using re-
gression equations such as 
(2)  v = β0 + β1pv, + β2D 
where D is a vector of demand shift variables 
(socioeconomic factors). In this format the 
travel cost model considers a site's charac-
teristics or the availability of substitute sites 
only implicitly through the visitation rate for a 
single site. Incorporating site characteristics 
into the basic model can be accomplished with 
the addition of a site attractiveness index
2 
(Cesario and Knetsch); the effect of substitute 
sites can be modelled in the multi-site frame- 
2 The travel cost model with an attractiveness index takes the 
form 
v1 = β0 + β1p1 + β2z1 + β3D 
where j refers to the jth recreation site and z is an index of relevant 
site characteristics. This approach assumes that a valid weighting 
system is known a priori by the analyst. Since characteristics are 
represented as an index, it is not possible to estimate a unique 
demand function for a single characteristic. Milon 
work proposed by Burt and Brewer.
3 Unfor-
tunately both site characteristics and substitu-
tion effects cannot be explicitly modelled 
using these approaches. The generalized 
travel cost model used by Vaughn and Russell 
and Desvousges, Smith and McGivney at-
tempts a reconciliation of site characteristics 
and cross-price substitutability in a single 
model
4 but, as Mendelsohn and Brown point 
out, the model fails to fully include cross-price 
effects. Therefore it is not possible to obtain 
an unbiased estimate of the demand (implicit 
price) for recreation site characteristics using 
the traditional travel cost framework. 
The Hedonic Price Model for Site 
Characteristics 
The hedonic pricing model developed by 
Rosen describes a competitive market in 
which buyers and sellers of heterogeneous 
commodities establish 'implicit prices' for the 
characteristics of a product. These implicit 
prices are a part of the total product price; 
equilibrium in the product market is charac-
terized by simultaneous equilibrium in each of 
the implicit markets. 
Mendelsohn and Brown's adaptation of the 
general hedonic pricing model suggests that 
the consumption of outdoor recreation can be 
modelled as a market for implicit site charac-
teristics. The consumer's choice problem can 
be expressed as 
(3)  u = U(v, zlt . . . , zn, y) 
s.t. M = pv(z) v + y 
3  The multi-site travel cost model can be expressed as 
vj * A + 2, &PJ 
+ A-"
0 
j-i 
where j again refers to the jth recreation site. The cross-price 
effects (dvj/dpi) i^j are revealed by the model and, in the case 
where the sites are perfect substitutes (symmetric cross-price ef-
fects), the multi-site model yields a unique estimate of the con-
sumers' surplus for a site (Hof and King). The model, however, 
cannot explain differences in the demand for sites which are 
caused by characteristics of the site. 
4  The generalized travel cost model can be expressed as a two 
stage problem. The structural model can be represented by 
Vj  -  £o +  PlPl  +   faZtPi. 
The demand parameters are ft and & and can be expressed as 
functions of the site characteristics 
£0 = a0 + «iZj 
/3, = a2 + a3z, 
The varying parameter method used by Vaughan and Russell does 
yield estimates of demand for site characteristics. But, the method 
does not consider the cost of substitute sites and hence does not 
yield unbiased measures of consumers' surplus. 
Outdoor Recreation      15 
where zlf . . . , zn are characteristics of recre-
ation sites and pv(z) is the total price (travel 
cost) of a visit to a recreation site with charac-
teristics set z. This formulation of the recre-
ation choice problem allows us to write the 
hedonic travel cost model as a two stage iden-
tification process 
(4)  pv(Zi) = R(z) 
(5)  Pv
l(2i) = U(z, pv, M) 
where R denotes the set of site characteristics 
available, pvHzi) is the implicit price of charac-
teristic i, and U is the consumer's utility (mar-
ginal rate of substitution) function.
5 The im-
plicit prices for site characteristics revealed by 
(4) permit the identification of a demand curve 
for characteristics using the utility function 
given by (5). Value measures for a particular 
characteristic can then be computed by 
evaluating the integral under the demand 
curve for different levels of the characteristic. 
While the hedonic travel cost methodology 
is intuitively appealing as a heuristic device, 
several problems have not yet been ade-
quately considered. First, the analogy be-
tween 'markets' for publicly provided recre-
ation goods and private markets for consump-
tion goods is, at best, misleading. Public 
suppliers of recreation sites and facilities make 
production decisions in a bureaucratic, politi-
cal setting and cannot be described as margi-
nal maximizers in the same manner as private 
firms who can adjust product characteristics to 
implicit prices revealed by the market. The 
array of recreation site characteristics facing 
an individual consumer can be viewed as 
fixed, at least in the short run, but it is impor-
tant to recognize that this 'short run equilib-
rium' is not the result of price-responsive pro-
duction decisions.
6 
On the consumer side, there are no clear 
theoretical or practical guidelines about a) 
which consumers to include in the analysis?, 
b) whether individual consumers or aggregate 
'travel zone consumers' should be modelled?, 
and c) what is the proper definition of travel 
costs in the hedonic framework? The delinea- 
5 In some related work on housing markets, McConnell and 
Phipps provide a justification for defining (5) as the consumer's 
utility (marginal rate of substitution) function. Quigley provides an 
empirical application for housing markets. 
6 This argument differs from the interpretation of the hedonic 
travel cost model given by Hueth and Strong. Their explanation 
accepts Mendelsohn and Brown's analogy on the supply of recre 
ation site characteristics and private markets for heterogeneous 
commodities. 16       April 1985 
tion of the study area for a travel cost model 
has traditionally been determined by visitation 
patterns at the relevant site(s). The hedonic 
travel cost framework cannot draw solely on 
the same data sources since it is necessary to 
include a sufficient number of sites to have 
variation in the characteristic  set.  Yet, the 
travel boundary must be truncated so that all 
other alternative sites are not also feasible 
substitutes. This restriction inherently imparts 
a downward bias to the value estimates for site 
characteristics. Another source of bias is the 
use of zonal aggregates in place of individual 
observations.  While the hedonic travel cost 
framework is correctly described as a con-
sumer maximization decision (see (3) above), 
the assumptions necessary for aggregation are 
not   innocuous.
7   In   effect,   aggregating   by 
travel zone in the hedonic travel cost model 
negates the "voting with your feet" frame-
work for analyzing housing location decisions 
and   assumes   identical   preferences   across 
travel zones. The potential bias results from 
the relatively low price (travel costs) consum-
ers in close proximity to a particular set of 
characteristics (site) would pay in comparison 
to consumers from more distant zones. While 
the individual's housing location decision may 
have originally been made to gain proximity to 
the site, these preferences are not revealed in 
the hedonic travel cost variable. This raises a 
third question about the proper measure of 
travel costs in the hedonic framework. If on-
site costs (both time and out-of-pocket ex-
penses) are not included then this would im-
part a downward bias to the implicit price of a 
particular  characteristic.   For   example,   the 
characteristic 'picnic facilities
1 could be eval-
uated in the hedonic travel cost framework 
and the effect of excluding on-site costs would 
be minimal. On the other hand, the value of a 
site characteristic such as 
4boating facilities' 
could be significantly affected if ramp costs, 
boat rental charges, etc. are not part of the 
travel costs. 
Finally, while equations (4) and (5) above 
offer a framework for valuing recreation site 
characteristics, the transition to an empirical 
application is not straightforward. The analyst 
must resolve the issue of which site charac-
teristics to include and how to measure 
7 The arguments developed by McConnell and Bockstael about 
the importance of error specification in zonal aggregation for tradi-
tional (single site) travel cost models are relevant here also. But, 
this issue is not discussed in this article. 
NJARE 
changes in the level of these characteristics. 
The specification of these variables and the 
selection of a functional form for the utility 
function in (5) have not been addressed in 
much detail in the literature.
8 The importance 
of identifying the value of recreation site 
characteristics for policy analysis suggests fur-
ther research on these issues should be a high 
priority for recreation economists. 
Conclusions 
The analysis of implicit prices for heteroge-
neous commodities in private markets has 
made considerable progress in the past de-
cade. The need for similar developments in 
nonmarket valuation for recreation goods is 
apparent from the growing awareness of the 
effect of changes in recreation site characteris-
tics due to environmental policy and public 
expenditure decisions. This article identifies 
some of the major problems with alternative 
approaches to estimating implicit values for 
characteristics in the nonmarket good setting. 
The hedonic travel cost model offers one pos-
sible framework in which both site charac-
teristics and substitution effects can be con-
sidered. A number of theoretical and practical 
ambiguities must be resolved before the basic 
model can be widely used for outdoor recre-
ation valuation research. 
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A Characteristics Approach to Recreation Demand.''

A Comparison of Alternative Approaches for Estimat8 For two potentially useful approaches to specification of the utility function for site characteristics, see Greig and Morey.

A Critical Review of the Travel Cost, Hedonic Travel Cost, and Household Production Models for Measurement of Quality Changes in Recreational Experiences.&quot;

Aggregation in Recreation Economics: Issues in Estimation and Benefit Measurement.&quot;

An Econometric Evaluation of a Generalized Consumer Surplus Measure: The Mineral King Controversy.&quot;

Economics of Outdoor Recreation. Baltimore: Resources for the Future,

Estimation of Net Social Benefits from Outdoor Recreation.&quot;

Exploring the NJARE 17 Identification Problem in Hedonic Markets.&quot;

Nonlinear Budget Constraints and Consumer Demand: An Application to Public Programs for Residential Housing,&quot;

On the Necessity of Simultaneous Recreation Demand Equation Estimation.&quot;

Recreation Evaluation Using a Characteristics Theory of Consumer Behavior.&quot;

Revealed Preference Approaches to Valuing Outdoor Recreation.&quot;

The Time-Bias in Recreation Benefit Estimates.&quot;

Valuing a Fishing Day: An Application of a Systematic Varying Parameter Model.&quot;

SITE CHARACTERISTICS AND REVEALED PREFERENCES FOR OUTDOOR RECREATION

SITE CHARACTERISTICS AND REVEALED PREFERENCES FOR OUTDOOR RECREATION

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