Measuring the opportunity cost of time in recreation demand modelling: an application to a random utility model of whitewater kayaking in Ireland
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2004Author
Hanley, Nick
O'Donoghue, Cathal
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O'Donoghue, C., Hanley, N., Hynes S. (2004) "Measuring the opportunity cost of time in recreation demand modelling: an application to a random utility model of whitewater kayaking in Ireland" ( Working Paper No. 0087) Department of Economics, National University of Ireland, Galway.
Abstract
The treatment of the opportunity cost of travel time and the measurement of travel costs
in recreational demand modelling has been a contentious issue for many decades. This
paper demonstrates how a potential wage rate can be used in the measurement of the
opportunity cost of travel (leisure) time in order to calculate the travel costs associated
with a recreational activity. Most recreation demand studies use a fraction of the wage
rate extracted from the gross income variable for the sample population, in calculating the
opportunity cost of travel time and each individuals overall travel cost. However, we use
each individuals potential hourly wage, as predicted by an earnings model from a
secondary dataset, based upon that persons actual socio-economic characteristics. These
travel cost estimates are then used in a multi-nomial logit random utility site choice
model to calculate the demand for whitewater kayaking in Ireland. We also use the
whitewater site choice models to estimate the welfare impacts of a number of different
management scenarios.