THE EFFECT OF MODELING SUBSTITUTE ACTIVITIES ON RECREATIONAL BENEFIT ESTIMATES

We use a nested-logit model of recreational fishing to examine how varying the range of fishing activities included in the choice set affects welfare measures. The basic analytical results are quite intuitive: welfare calculations with a site-choice travel cost model that omits relevant substitute activities will tend to understate gains and to overstate losses for a fixed sample and a fixed set of model parameters. The magnitude of bias in any particular case will be directly related to the degree of substitution between the omitted activities and the activities included in the model. In our empirical application, we examine changes in the quality of trout and salmon fishing on the Great Lakes and on anadromous runs. For most of the scenarios examined, we find that models that only include Great Lakes and andromous fishing activities, to the exclusion of inland fishing activities, yield welfare results that are relatively similar to those of models that include the full range of activities, provided care is taken to extrapolate the results to a common population. The results are due to the relatively low predicted rates of substitution between inland and Great Lakes fishing activities. We derive implications for benefits transfer procedures.