Does Economic Endogeneity of Site Facilities in Recreation Demand Models Lead to Statistical Endogeneity?

Random Utility Models of recreation demand are widely used to relate demand and value to the characteristics of recreation sites. Although some kinds of endogeneity problems have been studied in previous literature, no study has addressed the potential problem with site characteristics that are endogenously supplied. Some site characteristics, like facilities, could be endogenous in an economic sense due to the interplay of supply and demand. That is, more popular recreation sites tend to have better site characteristics since managers with limited budgets would be more willing to invest in them. If recreation site improvements are more likely to occur at the more popular sites, then this economic endogeneity might cause problems for econometric models linking site demand to facilities. In this paper, we use Monte Carlo simulations to investigate under what situations this economic endogeneity will lead to statistical endogeneity.