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Compensatory Restoration in a Random Utility Model of Recreation Demand

George R. Parsons, University of Delaware
Ami K. Kang, University of Delaware

Abstract

Natural Resource Damage Assessment cases often call for compensation in non-monetary or restoration equivalent terms. In this paper we present an approach that uses a conventional economic model, a travel-cost random utility model of site choice, to determine compensatory restoration equivalents for hypothetical beach closures on the Gulf Coast of Texas. Our focus is on closures of beaches on the Padre Island National Seashore and compensation for day-trip users. We use a mixed logit site choice model in our application with revealed preference data. Using the random utility model we identify restoration projects (changes in beach characteristics) that pass a simple Kaldor- Hicks test in compensating for beach closures and that have good alignment in terms of compensating those who actually suffer from the closures. Our compensatory restoration projects include beach cleaning, limiting vehicle access, providing rest rooms, providing lifeguards, and waiving a beach access fee.

Suggested Citation

George R. Parsons and Ami K. Kang. "Compensatory Restoration in a Random Utility Model of Recreation Demand" Contemporary Economic Policy 28.4 (2010): 453-463.
Available at: http://works.bepress.com/george_parsons/27