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Using a Control Function to Resolve the Travel Cost Endogeneity Problem in Recreation Demand Models

Richard Melstrom and Frank Lupi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper proposes using a control function to correct for endogeneity in recreation demand models. The control function approach is contrasted with the method of alternative specific constants (ASCs), which has been cautiously promoted in the literature. As an application, we consider the case of travel cost endogeneity in the demand for Great Lakes recreational fishing. Using data on Michigan anglers, we employ a random utility model of site choice. We show that either ASCs or the control function can correct for travel cost endogeneity, although we find that the model with ASCs produces significantly weaker results. Overall, compared with traditional approaches control functions may offer a more flexible means to eliminate endogeneity in recreation demand models.

Keywords: Recreation demand; random utility model; travel cost method; travel cost endogeneity; control function; alternative specific constants; recreational fishing (search for similar items in EconPapers)
JEL-codes: Q22 Q25 Q26 (search for similar items in EconPapers)
Date: 2012-08, Revised 2013-05
New Economics Papers: this item is included in nep-dcm, nep-ecm, nep-tur and nep-ure
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Related works:
Working Paper: Using a Control Function to Resolve the Travel Cost Endogeneity Problem in Recreation Demand Models (2013) Downloads
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