Controlling for Observed and Unobserved Site Characteristics in Rum Models of Recreation Demand

Babatunde Abidoye, Joseph A. Herriges and Justin Tobias ()

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Random Utility Maximization (RUM) models of recreation demand are typically plagued by limited information on environmental and other attributes characterizing the available sites in the choice set. To the extent that these unobserved site attributes are correlated with the observed characteristics and/or the key travel cost variable, the resulting parameter estimates and subsequent welfare calculations are likely to be biased. In this paper we develop a Bayesian approach to estimating a RUM model that incorporates a full set of alternative specific constants, insulating the key travel cost parameter from the influence of the unobserved site attributes. In contrast to estimation procedures recently outlined in Murdock (2006), the posterior simulator we propose (combining data augmentation and Gibbs sampling techniques) can be used in the more general mixed logit framework in which some parameters of the conditional utility function are random. Following a series of generated data experiments to illustrate the performance of the simulator, we apply the estimation procedures to data from the Iowa Lakes Project. In contrast to an earlier study using the same data (Egan \textit{et al.} \cite{eganetal}), we find that, with the addition of a full set of alternative specific constants, water quality attributes no longer appear to influence the choice of where to recreate.

Keywords: nonmarket valuation; water quality; discrete choice (search for similar items in EconPapers)
JEL-codes: C25 Q25 Q51 (search for similar items in EconPapers)
Date: 2010-09-30
New Economics Papers: this item is included in nep-dcm, nep-ecm, nep-env and nep-tur
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http://www2.econ.iastate.edu/papers/p11559-2010-05-31.pdf (application/pdf)

Related works:
Journal Article: Controlling for Observed and Unobserved Site Characteristics in RUM Models of Recreation Demand (2012)
Working Paper: Controlling for observed and unobserved site characteristics in RUM models of recreation demand (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:31559

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