The Case of the Lagoon of Venice
The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by Anna Alberini, Paolo Rosato and Margherita Turvani
Chapter 2: Recreational Demand, Travel Cost Method and Flow Fixed Costs
Edi Defrancesco and Paolo Rosato 2.1 INTRODUCTION The Travel Cost Method (TCM) is one of the most frequently used approaches to estimating the use values of recreational sites. The TCM was initially suggested by Hotelling (1949) and subsequently developed by Clawson (1959) in order to estimate the benefits from recreation at natural sites. The method is based on the premise that the recreational benefits at a specific site can be derived from the demand function that relates observed users’ behaviour (i.e., the number of trips to the site) to the cost of a visit. One of the most important issues in the TCM is the choice of the costs to be taken into account. The literature usually suggests considering direct variable costs and the opportunity cost of time spent travelling to and at the site. However, some authors (Walsh, 1986, p. 275) have underscored the importance of studying the effect of fixed costs (equipment, license fees, and so on) on the long-run price elasticity of demand. The first aim of this chapter is to discuss the role played by a category of fixed costs that we term annual flow fixed costs, that is annual fixed expenses related to the recreational activity, on the consumer decision-making process under different time horizons. These considerations are important when, as is often the case, a recreational user incurs substantial fixed costs directly related to the recreational activity on an annual basis, regardless of the number of trips undertaken (for example, an annual site licence)...
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