Edward R. Morey

Competition in regional environmental policies when plant locations are endogenous

Abstract A two-region model is presented in which an imperfectly competitive firm produces a good with increasing returns at the plant level. Production of the good causes local pollution. The firm decides whether to maintain plants in both regions, serve both regions from a single plant or shut down. If the disutility of pollution is high enough, the two regions will compete by increasing their environmental taxes (standards) until the polluting firm is driven from the market. Alternatively, if the disutility from pollution is not as great, the regions will usually compete by undercutting each others pollution tax rates.

A Repeated Nested-Logit Model of Atlantic Salmon Fishing

Participation and site choice for Atlantic salmon fishing are modeled in the context of a repeated three-level nested-logit model. Consumers surplus measures are derived for different levels of species availability in the Penobscot River, the most important salmon river in New England. For comparison, six other travel-cost models are estimated. These include restrictive cases of the nested-logit model, a partial demand model, and two single-site demand models. Comparisons across these models indicate the importance of modeling the participation decision, including income effects, and of adopting a nested-logit structure rather than a single-level logit structure.

A discrete-choice model of recreational participation, site choice, and activity valuation when complete trip data are not available

Abstract A discrete-choice model of the demand for site-specific recreational activities is developed and estimated. It simultaneously predicts both how many trips the individual will take and which site will be chosen on each trip. The model is formulated to estimate demand when the data set reports the total number of trips in a given time period, but the actual destinations for only a subset of the total. The model also includes a correction for sample-selectivity bias. The application is marine recreational fishing. The consumers surplus associated with any change in supply conditions is derived and used to assess the impact of changes in species availability.

Using Stated-Preference Questions to Investigate Variations in Willingness to Pay for Preserving Marble Monuments: Classic Heterogeneity, Random Parameters, and Mixture Models

This paper investigates heterogeneity in the preferences/WTP (willingness to pay) to preserve marble monuments in Washington, D.C. This is done in the context of three different discrete-choice random-utility models. The main focus is to estimate a mixture model of choices over preservation programs. This model captures the best features of random-parameters models and models that assume preference parameters are deterministic functions of observable characteristics of the individual. The mixture model, and it alone, predicts that increased preservation is a bad for a significant proportion of young, non-Caucasians. That some proportion of the population might consider preservation a bad is a contingency that should be planned for in efforts to value cultural resources. Data and computer code are available athttp://www.colorado.edu/economics/morey/dataset.html.

Investigating Preference Heterogeneity in a Repeated Discrete-Choice Recreation Demand Model of Atlantic Salmon Fishing*

Estimating a demand system under the assumption that preferences are homogeneous may lead to biased estimates of parameters for any specific individual and significantly different expected consumer surplus estimates. This paper investigates several different parametric methods to incorporate heterogeneity in the context of a repeated discrete-choice model. The first is the classic method of assuming utility to be a function of individual characteristics. Second, a random parameters method is proposed, where preference parameters have some known distribution. Random parameters logit causes the random components to be correlated across choice occasions and, in a sense, eliminates IIA. Simulation noise is discussed. Finally, methods are proposed to relax the assumption that the unobserved stochastic component of utility is identically distributed across individuals. For example, randomization of the logit scale, which is a new method, allows noise levels to vary across individuals without the added burden of explaining the source using covariates. The application is to Atlantic salmon fishing, and expected compensating variations and changes in trip patterns are compared across the models for three policy-relevant changes in fishing conditions at the Penobscot River, the best salmon fishing site in Maine.

Using Contingent Valuation to Estimate a Neighbourhood's Willingness to Pay to Preserve Undeveloped Urban Land

Contingent valuation (CV) is used to estimate a neighbourhoods willingness to pay (WTP) to preserve a 5.5-acre parcel of undeveloped land in Boulder, Colorado, that provides views, open space and wildlife habitat. Households were surveyed to determine bounds on their WTP for preservation. An interval model is developed to estimate sample WTP as a function of distance, income and other characteristics. The model accommodates individuals who might be made better off by development and addresses the accumulation of WTP responses at zero. Weighted sample WTP estimates are aggregated to obtain the neighbourhoods WTP. This application demonstrates that contingent valuation is a flexible policy tool for land managers and community groups wanting to estimate WTP to preserve undeveloped urban land.

Characteristics, consumer surplus, and new activities: A proposed ski area

Abstract Physical characteristics of activities and personal characteristics of the individual are incorporated into an expenditure function. This function is used to define the compensating and equivalent variation for changes in the costs or physical characteristics of the existing activities, or for a proposed activity as a function of its proposed characteristics and cost. The model is used to estimate the demand for, and the CVs and EVs associated with, the development of a Colorado ski area. These vary across skiers as a function of skiing ability, value of time, location of residence, and skiing budget.

The Choice of Ski Areas: Estimation of a Generalized CES Preference Ordering with Characteristics

Abstrac-t-A Generalized CES (GENCES) preference ordering is developed and estimated. It incorporates characteristics of both the individual and the activities. The GENCES is used to explain the share of ski time an individual allocates to each ski area as a function of site characteristics, skiing ability, and costs. The stochastic specification limited the shares to the 0-1 simplex. This specification was found to be more appropriate than the conventional normality assumption. The null hypothesis that preferences are homothetic and additive is rejected. Charactenrstics, ability, and costs are important determinants of demand. The estimated elasticities provide numerous insights into skier behavior.

A Simple Method of Incorporating Income Effects into Logit and Nested-Logit Models: Theory and Application

Substantive income effects are incorporated in a logit or nested-logit model by assuming that utility is a piece-wise linear spline function of residual income. Specific income data are not required, only income by category. Expected compensating variation is easily and accurately approximated by the difference between expected maximum utility in the proposed and initial state, multiplied by the inverse of the individuals initial marginal utility of money. This approximation is almost exact because although any policy can, in theory, cause an individual to jump income categories, for most policies this probability will be very small.

Separability, partial demand systems, and consumer's surplus measures

Abstract In practice, complete demand systems are not estimated. Rather, either an incomplete demand system is estimated, or separability is invoked and a partial demand system is estimated. This paper considers the relationship between the conventional compensating variation (equivalent variation) and the corresponding welfare measure that can be derived from a partial demand system and the current budget allocation to the separable group. Even assuming the separability assumption invoked is appropriate, these partial measures provide, in general, only a limited amount of information about the compensating variation and no information about the equivalent variation. Great care is therefore needed when using partial welfare measures to evaluate policy.