A Survey of Current Issues
New Horizons in Environmental Economics series
Edited by Henk Folmer and Tom Tietenberg
Joseph A. Herriges and Catherine L. Kling The ﬁrst and second welfare theorems assure us that goods traded in wellfunctioning markets will be produced in an eﬃcient quantity. In contrast, goods that are public in nature, and for which well-functioning markets do not exist, may need government provision in order to be eﬃciently provided. The eﬃcient level of provision in turn depends on the value consumers place on the good. Unfortunately, while the price of a market good can be interpreted as its marginal value, no such marginal value information is available for nonmarket goods such as water quality or hunting success at a marsh; thus the problem of nonmarket valuation arises. Recreation demand models have played a central role in the nonmarket valuation literature since its inception by linking environmental quality with a market-like good (that is, the use of recreational resources) for which value information does exist. A subject search in ECONLit of ‘recreation demand’ and related terms yields 171 distinct articles on the topic during the last decade alone. The prevalence of recreation demand studies in the literature attests to a public policy need to understand eﬃcient provision levels of these goods. In addition to the policy relevance of recreation demand models, researchers have also found recreation data sets to be a rich source for empirical and econometric research. This is due in part to the unique characteristic of price variation in recreation demand data. Speciﬁcally, the price of the good varies...
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