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Nonparametric Bounds on Welfare with Measurement Error in Prices: Techniques for Non-Market Resource Valuation

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  • Crooker, John R.

Abstract

Nonparametric techniques are frequently applied in recreation demand studies when researchers are concerned that parametric utility specifications impart bias upon welfare estimates. A goal of this paper is to extend previous work on nonparametric bounds for welfare measures to allow for measurement errors in travel costs. Haab and McConnell (2002) state that issues in travel time valuation continue to be topical in the recreational demand literature. This paper introduces a bootstrap augmented nonparametric procedure to precisely bound welfare when price data contains measurement error. The technique can be extended and becomes more convenient relative to other approaches when more than two site visits are made by a single recreationist. These techniques are demonstrated in a Monte Carlo experiment.

Suggested Citation

  • Crooker, John R., 2007. "Nonparametric Bounds on Welfare with Measurement Error in Prices: Techniques for Non-Market Resource Valuation," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 36(2), pages 1-14, October.
    • Handle: RePEc:ags:arerjl:44700
    DOI: 10.22004/ag.econ.44700
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    References listed on IDEAS

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    1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    2. Timothy C. Haab & Kenneth E. McConnell, 2002. "Valuing Environmental and Natural Resources," Books, Edward Elgar Publishing, number 2427.
    3. Alan Randall, 1994. "Difficulty with the Travel Cost Method," Land Economics, University of Wisconsin Press, vol. 70(1), pages 88-96.
    4. Danielle Hagerty & Klaus Moeltner, 2005. "Specification of Driving Costs in Models of Recreation Demand," Land Economics, University of Wisconsin Press, vol. 81(1).
    5. Crooker, John & Kling, Catherine L., 2000. "Nonparametric Bounds on Welfare Measures: A New Tool for Nonmarket Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 39(2), pages 145-161, March.
    6. Douglas M. Larson & Sabina L. Shaikh, 2004. "Recreation Demand Choices and Revealed Values of Leisure Time," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 264-278, April.
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    8. Herriges, Joseph A. & Kling, Catherine L., 1999. "Valuing Recreation and the Environment: Revealed Preference Methods in Theory and Practice, New Horizons in Environmental Economics," Staff General Research Papers Archive 12330, Iowa State University, Department of Economics.
    9. Kling, Catherine L., 1989. "The Importance Of Functional Form In The Estimation Of Welfare," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(1), pages 1-7, July.
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    11. Kenneth E. McConnell & Ivar Strand, 1981. "Measuring the Cost of Time in Recreation Demand Analysis: An Application to Sportfishing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(1), pages 153-156.
    12. Teofilo Ozuna & Lonnie L. Jones & Oral Capps, 1993. "Functional Form and Welfare Measures in Truncated Recreation Demand Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(4), pages 1030-1035.
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