Travel of national parks. Hotelling stated that people

costs methods are among the oldest environmental valuation techniques. They
first were used in the USA for valuating national parks, especially for
planning and managing outdoor recreation activities, like cross country skiing,
hiking, canoeing etc. Since these activities are provided at a low or zero
price, the question the national park managers were confronted was, how could
the economic value of such activities be measured. The idea behind the travel
cost method is simple; every user pays a price measured by her travel cost. The
consumer’s surplus can easily derived from integrating all visitors’ travel
costs. The travel cost method assumes a weak complementarity between the
environmental good and the expenditure for consuming this environmental good.
Typical such environmental goods have a high aesthetical value and/or a high
recreational value. To use these environmental goods, people have to travel to
these areas and they to bear the travel costs from their home to that area.
Travel costs include transportation costs, admission charge, but also the time
for travelling and for visiting that environmental good. The travel cost method
was first proposed in 1947 by Harold Hotelling in a letter written to in a
letter to the director of the National Park Service. Asked how to measure the
economic value of national parks. Hotelling stated that people usually have to
travel considerable distances and thereby bear money costs. People will travel
to a national park as long as their net satisfaction from visiting the park is
positive. Hence those visitors with the largest distance travelled, will
getting zero net satisfaction, i.e. the value of the park is equal to their
transportation costs. All visitors with less distance get a surplus, all
visitors with a larger distance would get a net loss, hence they stay at home.


9.2.2 Hedonic Pricing

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pricing techniques are based on the assumption that agents value the
characteristics of a good rather than the good itself. Hedonic models use
market data like prices and then break down the data into its components or
characteristics. A chance in the level of these components or characteristics
can reveal the prices (value) of these components or characteristics. Typically,
hedonic pricing methods use property values as a source of information for
valuing environmental goods. For example, assume that two houses are offered on
the housing market. These houses are totally identical, everything is the same,
but these houses are located in different neighbourhoods. Would these two
houses receive the same price? This would only be the case, if all the
characteristics of the neighbourhoods would be identical, too. Neighbourhood
characteristics with influence on the house price are local infrastructure,
like shops, pubs, public traffic, schools, libraries etc, but also such thinks
like crime rate or average income. Besides these socio-economic
characteristics, environmental characteristics can be found too: air quality,
noise from a nearby airport or highway, open space nearby, distance to a local
landfill etc. The hedonic pricing method assumes that people’s valuation of
environmental components can be derived from the amount of money they are
willing to pay for these components through the housing market. Typically, a
house in an air polluted neighborhood will receive lower prices on the housing
market than a house in a clean neighborhood. The problem is to calculate the
impact of one characteristic on the price of the good, here the price of
housing. The statistical technique used to solve this problem is known as
multiple regression analysis. These techniques are used to find out the hedonic
or implicit price for each component. Therefore, the consumer surplus
corresponding with variations in, for example, air quality can be estimated.