Joseph A. Herriges

Estimation and Welfare Calculations in a Generalized Corner Solution Model With an Application to Recreation Demand.

The Kuhn-Tucker model of Wales and Woodland (1983) provides a utility theoretic framework for estimating preferences over commodities for which individuals choose not to consume one or more of the goods. Due to the complexity of the model, however, there have been few applications in the literature and little attention has been paid to the problems of welfare analysis within the Kuhn-Tucker framework. This paper provides an application of the model to the problem of recreation demand. In addition, we develop and apply a methodology for estimating compensating variation, relying on Monte Carlo integration to derive expected welfare changes.

The regulation of non-point-source pollution under imperfect and asymmetric information

Abstract This paper develops a Bayesian framework for discussing the role of information in the design of non-point-source pollution control mechanisms. An ambient concentration tax is examined, allowing for spatial transport among multiple zones. Imposition of the tax requires costly measurement of concentrations in selected zones, and the selection of zones for measurement must be undertaken without perfect information regarding several parameters of the problem. Potentially crucial information issues discussed include: (a) the impact of asymmetric priors regarding fate and transport, (b) the cost of measuring ambient concentration, and (c) the optimal acquisition of information regarding fate and transport.

Valuing Water Quality as a Function of Water Quality Measures

Employing a unique and rich data set of water quality attributes in conjunction with detailed household characteristics and trip information, we develop a mixed logit model of recreational lake usage and undertake thorough model specification and fitting procedures to identify the best set of explanatory variables, and their functional form for the estimated model. Our empirical analysis shows that individuals are responsive to the full set of water quality measures used by biologists to identify the impaired status of lakes. Thus, changes in these quality measures are not simply a scientific exercise, but they also translate into changes in the recreational usage patterns and well-being of individual households. Willingness-to-pay (WTP) estimates are reported based on improvements in these physical measures.

Inducing Patterns of Correlation and Substitution in Repeated Logit Models of Recreation Demand

Repeated logit models are among the most commonly applied methods for modeling seasonal recreation demand. In this paper we examine the capabilities of the repeated nested logit and repeated mixed logit models to capture patterns of error correlation and demand substitution. Particular attention is paid to the use of the mixed logit framework to generalize the strong assumptions on correlation patterns across sites and choice occasions imbedded in the nested logit model. We examine the implications for the range of price elasticities allowed in both models based on the implied correlation structures.

Combining Revealed and Stated Preferences: Consistency Tests and Their Interpretations

This article models the recreation demand for Iowa wetlands, combining survey data on both actual usage patterns (i.e., revealed preferences (RPs)) and anticipated changes to those patterns under hypothetical increases in trip costs (i.e., stated preferences (SPs)). We formulate and test specific hypotheses concerning potential sources of bias in each approach and discuss what can be learned about the validity of the models from such tests.

Consistency of residential customer response in time-of-use electricity pricing experiments☆

Abstract Using data from five experimental implementations of residential TOU rates in the United States, we estimate a consumer demand model for each experiment, and test the hypothesis that the elasticities of substitution are identical across experiments. The model is derived from an indirect utility function that permits the modelling to be separated into three stages. At each stage the parameters depend upon appliance stocks, housing characteristics, and climate. We do not reject the hypothesis that the parameters determining the elasticities of substitution are identical across experiments. This yields a generally applicable model for predicting residential response to TOU rates.

Testing the consistency of nested logit models with utility maximization

This paper provides simple necessary conditions for testing the local consistency of nested logit models with stochastic utility maximization. A graphical analysis illustrates the extent to which these conditions extend the range of admissible dissimilarity coefficients beyond the unit interval.

LIVING WITH HOGS IN IOWA: THE IMPACT OF LIVESTOCK FACILITIES ON RURAL RESIDENTIAL PROPERTY VALUES

We estimated a hedonic model to explain variations in residential sales price with standard house attributes, such as number of bedrooms and square feet of living space, as well as the effects of distance and density of livestock feeding operations. We find that livestock operations have an overall statistically significant effect on property values. Predicted negative effects are largest for properties that are downwind and close to livestock operations. In addition, feeding operations that are moderate in size have more impact than do large-scale operations, most likely reflecting age, type, and management practices of the moderate-sized operations. (JEL Q12, Q15, R21)

Limits to environmental bonds

Abstract Bonds have recently been promoted as an alternative tool to control environmental damages, particularly in those instances when the innovative activities of a firm have uncertain future impacts. Under this mechanism, a firm would post a bond ex ante, forfeiting all or a portion of the bond if its activities harmed environmental resources. While the benefits of bonds have been developed, there has been little systematic effort to explore their limitations. In contrast, the labor literature has extensively studied the limits of bonds as a mechanism to prevent worker shirking. Using insights from this parallel problem, this paper explores the limits to environmental bonds, focusing on the problems of moral hazard, liquidity constraints, and legal restrictions. Each limit offers a challenge to the success of environmental bonds. We explore the use of bonds in surface mining and agricultural nonpoint pollution as motivating examples. We also consider how other incentive schemes suggested by the labor literature might prove useful in the context of environmental management. We consider the labor mechanisms of efficiency wages, increasing wage profiles, trust funds, and rank-order tournaments.

Residential Demand for Electricity Under Inverted Block Rates: Evidence From a Controlled Experiment

Block-rate structures are used extensively in public-utility pricing, including residential electricity. Estimating price elasticities in this context is complicated by the resulting nonlinearity of the consumers budget constraint. This article estimates the demand for electricity under inverted block rates using data from a residential rate experiment. The study provides an opportunity to obtain short-run price elasticities in an experimental setting and to compare alternative estimators developed for nonlinear budget constraints. Elasticities of demand with respect to individual components of the block rate are developed using a modification of the structural maximum likelihood estimator.