The travel cost method of economic valuation, travel cost analysis, or Clawson method is a

revealed preference Revealed preference theory, pioneered by economist Paul Anthony Samuelson in 1938, is a method of analyzing choices made by individuals, mostly used for comparing the influence of policies on consumer behavior. Revealed preference models assume t ...

method of economic valuation used in

cost–benefit analysis Cost–benefit analysis (CBA), sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives. It is used to determine options which provide the best approach to achieving benefits ...

to calculate the value of something that cannot be obtained through market prices (i.e. national parks, beaches, ecosystems). The aim of the method is to calculate

willingness to pay In behavioral economics, willingness to pay (WTP) is the maximum price at or below which a consumer will definitely buy one unit of a product.Varian, Hal R. (1992), Microeconomic Analysis, Vol. 3. New York: W.W. Norton. This corresponds to the st ...

for a constant price facility. The technique was first suggested by the statistician

Harold Hotelling Harold Hotelling (; September 29, 1895 – December 26, 1973) was an American mathematical statistician and an influential economic theorist, known for Hotelling's law, Hotelling's lemma, and Hotelling's rule in economics, as well as Hotelling's T ...

in a 1947 letter to the director of the

National Park Service The National Park Service (NPS) is an agency of the United States federal government within the U.S. Department of the Interior that manages all national parks, most national monuments, and other natural, historical, and recreational propertie ...

of the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...

for a method to measure the benefit of National Parks to the public. The method was further refined by Trice and Wood (1958) and Clawson (1959). The technique is one approach to the estimation of a

shadow price A shadow price is the monetary value assigned to an abstract or intangible commodity which is not traded in the marketplace. This often takes the form of an externality. Shadow prices are also known as the recalculation of known market prices in o ...

Methodology

The general principle is that individual visitors spend varying amounts of time and money to access a particular resource. The further away an individual from the resource, the more time and money they spend and the less frequent is the visit. Individual closer to the resource tend to visit more often and spend less. By fitting the distribution of individuals within this spectrum an average of the transport and opportunity costs of the time spent travelling to a recreational site is used to determine the value of the site. Various approaches may be used in the actual collection of data and the estimation. The travel cost method of economic valuation is a revealed preference method because it looks at actual human behavior to try to define the value people place on something. * A sample of visitors to the facility are selected * These visitors are split into "zones" depending on their distance travelled to the facility. * The average distance to the facility and the average travel cost to the facility from each zone are calculated. * The visit rate from each zone is calculated. (i.e.) Visit rate: The number of visitors from a given zone/The population of that zone * The visit rate is regressed against travel cost in order to create a visit rate curve. Visit rate from given zone = f(cost from given zone) VR=a+b.C * This curve can then be used to obtain estimates of visit rates given differing levels of total costs. * This enables estimates of numbers of visitors from each zone to be made given differing level of facility price. * The sum of the number of visitors from each zone can be plotted/regressed against these differing levels of facility price in order to create a demand curve for the facility. *The area under this demand curve is the willingness to pay for the facility which can be used as a valuation for CBA purposes.

References

External links

Ecosystem valuation

at

IDEAS/RePEc Research Papers in Economics (RePEc) is a collaborative effort of hundreds of volunteers in many countries to enhance the dissemination of research in economics. The heart of the project is a decentralized database of working papers, preprints, ...

Environmental economics {{econ-stub