Travel Costs
Lecture 12
October 9, 2002
12-706 / 73-359
Feedback on Evals
The ‘Happy’ talk
Switch to optional Friday
recitations/project review sessions
Move project presentations before
December 1, 02.
Travel Costs
Time is a valuable commodity (time is $)
Most major transportation/infrastructure
projects built to ‘save travel costs’
Need to tradeoff project costs with benefits
Ex: new highway that shortens commutes
Differences between ‘travel’ and ‘waiting’
Waiting time disutility might be orders of
magnitude higher than just ‘travel disutility’
Why? Travelling itself might be fun
Valuation: Travel Cost
Method
Estimate economic use values associated
with ecosystems or sites that are used for
recreation
changes in access costs for a recreational site
elimination of an existing recreational site
addition of a new recreational site
changes in environmental quality
www.ecosystemvaluation.org/travel_costs.htm
Travel Cost Method
Basic premise - time and travel cost
expenses incurred to visit a site represent
the “price” of access to the site.
Thus, peoples’ WTP 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’ WTP
for a marketed good based on the quantity
demanded at different prices.
Example Case
A site used mainly for recreational fishing
is threatened by development. Pollution
and other impacts from this development
could destroy the fish habitat at the site,
resulting in a serious decline in, or total
loss of, the site’s ability to provide
recreational fishing services. Resource
agency staff want to determine the value
of programs or actions to protect fish
habitat at the site.
Why Use Travel Cost?
Site is primarily valuable to people as a
recreational site. There are no endangered
species or other highly unique qualities that
would make non-use values for the site
significant.
The expenditures for projects to protect the
site are relatively low. Thus, using a
relatively inexpensive method like travel cost
makes the most sense.
Relatively simple compared to other methods
Options for Method
A simple zonal travel cost approach, using
mostly secondary data, with some simple
data collected from visitors.
An individual travel cost approach, using a
more detailed survey of visitors.
A random utility approach using survey
and other data, and more complicated
statistical techniques.
Zonal Method
Simplest approach, estimates a value for
recreational services of the site as a
whole. Cannot easily be used to value a
change in quality of recreation for a site
Collect info. on number of visits to site from
different distances. Calculate number of
visits “purchased” at different “prices.”
Used to construct demand function for site,
estimate consumer surplus for recreational
services of the site.
Zonal Method Steps
1. define set of zones around site. May be
defined by concentric circles around the site, or
by geographic divisions, such as metropolitan
areas or counties surrounding the site
2. collect info. on number of visitors from each
zone, and the number of visits made in the last
year.
3. calculate the visitation rates per 1000
population in each zone. This is simply the total
visits per year from the zone, divided by the
zone’s population in thousands.
Sample Data
Κ
Zone
Total
Visits/Year
Zone
Population
Visits/1000
0
1
2
3
Beyond 3
Total Visits
К
К
400
400
400
400
0
1600
1000
2000
4000
8000
400
200
100
50
Estimating Costs
4. calculate average round-trip travel
distance and travel time to site for each
zone. Assume Zone 0 has zero travel
distance and time. Use average cost per
mile and per hour of travel time, to calculate
travel cost per trip. Standard cost per mile
is $.30. The cost of time is from average
hourly wage. Assume that it is $9/hour, or
$.15/minute, for all zones, although in
practice it is likely to differ by zone.
Data
Zone
0
1
2
3
Round Round
Trip Dist. TripК
Time
0
20
40
80
0
30
60
120
Distance Travel
times
Time
Cost/Mile times
($.30)
Cost/M
inute
($.15)
0
0
$6
$4.50
$12
$9.00
$24
$18.00
Total
Travel
Cost/
Trip
0
$10.50
$21.00
$42.00
5. Use regression to find relationship between visits and travel costs,
e.g.
Visits/1000 = 330 – 7.755*(Travel Cost)
Final steps
 6. construct demand for visits with regression. First point on
demand curve is total visitors to site at current costs (with no
entry fee), which is 1600 visits. Other points by estimating
number of visitors with different hypothetical entrance fees
(assuming that an entrance fee is valued same as travel
costs). Start with $10 entrance fee. Plugging this into the
estimated regression equation, V = 330 – 7.755C:
Zone
0
1
2
3
Travel Co st
plus $10
$10
$20.50
$31.00
$52.00
Visits/ 1000
Population
Total Visits
252
171
90
0
1000
2000
4000
8000
Total Visits
252
342
360
0
954
Demand curve
This gives the second point on the demand
curve—954 visits at an entry fee of $10. In
the same way, the number of visits for
increasing entry fees can be calculated:
Entry Fee
$20
$30
$40
$50
Total Visits
409
129
20
0
Graph
Consumer surplus = area
under demand curve =
benefits from recreational
uses of site around $23,000
per year, or around $14.38 per
visit ($23,000/1,600).
Agency’s objective was to
decide feasibility to spend
money to protect this site. If
actions cost less than
$23,000 per year, the cost will
be less than the benefits
provided by the site.
Value - travel time savings
Many studies seek to estimate VTTS
Can then be used easily in CBAs
Book reminds us of Waters 1993 (56
studies)
Many different methods used in studies
Route, speed, mode, location choices
Results as % of hourly wages not a $
amount
Mean value of 48% of wage rate (median
40)
Government Analyses
Typically 40-60% of hourly rate in CBAs
US (FHA) 60% - Canada 50%
Again, travel versus leisure important
Wide variation: 1:1 to 5:1!
Income levels are important themselves
VTTS not purely proportional to income
Waters suggests ‘square root’ relation
E.g. if income increases factor 4, VTTS by 2
Recreation Benefits
Value of recreation studies
‘Values per trip’ -> ‘value per activity day’
Activity day results (Sorg and Loomis 84)
Sport fishing: $25-$100, hunting $20-$130
Camping $5-$25, Skiing $25, Boating $6-$40
Wilderness recreation $13-$75
Are there issues behind these results?