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Choice Set Definition Issues in a Kuhn-Tucker Model of Recreation Demand

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  • Dan Phaneuf

    (North Carolina State University)

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    Abstract

    This line of research considers econometric methods for dealing with agent-level consumer choice data in the presence of binding non-negativity constraints. Specifically, the Kuhn-Tucker (KT) model and its dual counterpart (Wales and Woodland (1983), Lee and Pitt (1987), Phaneuf (1999), Phaneuf, et. al. (2000)) are applied to the problem of recreation site choice. The conceptual attractiveness of these methods is generally acknowledged, but the difficulty of estimation has prevented wide application. Extensions of these works to allow wider application are emphasized here. These include the use of more general functional forms and error structures, expanding the dimensions of models that can be estimated, improving the tractability and usability of these models, and providing additional applications. Good progress has been made in these areas. The paper included for consideration provides results for a 16 good complete demand system KT model applied to a fresh data set on the demand for visits to wetland recreation sites in Iowa. Recreation demand provides a good platform to study binding non-negativity constraints, since few individuals visit all recreation sites available to them and hence the data contain many zeros. The KT method recovers estimates of the utility function, from which utility consistent welfare measures resulting from changes in wetland characteristics and availability are calculated via Monte Carlo integration. A second paper is included for reference, providing more detail on the calculation and interpretation of welfare effects.

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    Bibliographic Info

    Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1821.

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    Date of creation: 01 Aug 2000
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    Handle: RePEc:ecm:wc2000:1821

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    1. Daniel J. Phaneuf & Catherine L. Kling & Joseph A. Herriges, 1998. "Estimation and Welfare Calculations in a Generalized Corner Solution Model with an Application to Recreation Demand," Center for Agricultural and Rural Development (CARD) Publications 99-wp207, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Wales, T. J. & Woodland, A. D., 1983. "Estimation of consumer demand systems with binding non-negativity constraints," Journal of Econometrics, Elsevier, vol. 21(3), pages 263-285, April.
    3. Bockstael, Nancy E & McConnell, Kenneth E, 1983. "Welfare Measurement in the Household Production Framework," American Economic Review, American Economic Association, vol. 73(4), pages 806-14, September.
    4. Herriges, Joseph A. & Kling, Catherine L., 2003. "Recreation Demand Models," Staff General Research Papers 10211, Iowa State University, Department of Economics.
    5. Carson, Richard T. & Hanemann, W. Michael, 2006. "Contingent Valuation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 17, pages 821-936 Elsevier.
    6. Bockstael, N E & McConnell, K E, 1993. "Public Goods as Characteristics of Non-market Commodities," Economic Journal, Royal Economic Society, vol. 103(420), pages 1244-57, September.
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    Cited by:
    1. Bhat, Chandra R., 2008. "The multiple discrete-continuous extreme value (MDCEV) model: Role of utility function parameters, identification considerations, and model extensions," Transportation Research Part B: Methodological, Elsevier, vol. 42(3), pages 274-303, March.

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