There are two types of valuation that can be used in valuing non-market goods such as
preference approach. For the revealed preference approach there are several methods,
namely Hedonic Price Method, Averting Behaviour Method, and Travel Cost Method.
From all these methods, the TCM is the most appropriate method to be adopted in this
study since it is a method that uses the cost of travelling to a non-priced recreation site
as a means of inferring the recreational benefits which that site provides.
There are two types of the TCM normally used in past studies; Individual Travel Cost
Method, and Zonal Travel Cost Method. Both methods have their strength and their
weaknesses. For instance, the ZTCM is best suited to estimating consumer surplus for
recreation at sites where visitor origins are relatively evenly distributed (Garrod and
Willis, 1999). Problems arise when visitor origins distributed asymmetrically or where
there are a few important points of origin to a single site. Another issue with the ZTCM
raised by some authors is about the zonal definition. For example, Smith and Kopp
(1980) demonstrated that the assumptions underlying the definition of zones can
seriously impact on the resulting estimates of consumer surplus. Another limitation of
the ZTCM is that it assumes that the estimated demand is generated by a “representative
consumer” whose behaviour reflects the average behaviour in the population of a zone.
Another method is the ITCM that has an advantage over the ZTCM in that it takes more
account of the inherent variation in the data, rather than relying on zonal aggregate data.
The procedure undertaken in the ITCM requires researchers to undertake an on-site
questionnaire survey of visitors aimed at eliciting the estimates of household or
individual visit frequencies over a given time period, plus information on the cost of
characteristics. With the information, we can derive a demand curve from which
consumer surplus may be estimated. Even though the ITCM is generally more flexible
and applicable at a wider range of sites than the ZTCM, the former requires more
information about individual visitors and it relies on surveys to elicit visitor
characteristics, preferences and behaviour.
When both methods were carried out using the same data sets, considerable differences
have been observed in estimated consumer surplus such as found by Willis and Garrod
(1991), and Hanley (1989). Taking all the above into consideration, this study used both
methods to elicit consumer surplus and at the same time to investigate whether we will
agree with the abovementioned author or not.
Revealed preference, or behaviour in the market place, cannot value all environmental
goods. As an example, by using TCM, one can estimate the value of a national park by
assessing the demand for a related market good, which is by calculating how much
people are prepared to spend on travel to gain access to that particular park. However,
one cannot estimate non-use values, since there is, by definition, no related market good
for the mere existence, as distinct from use, of the park by using TCM. Thus, stated
preference approaches is the most appropriate approach to use to value public goods
such as wilderness and landscape preservation; or the value of preserving historical
artefacts, monuments, or the character of old towns. This is because in stated preference
approach, respondents are directly asked of the WTP they put on a good in a study
In the stated preference approach, currently there are two most prominent methods
namely the Contingent Valuation Method and the Choice Experiment or Choice
Modelling. One advantage that CM has over CVM is the ability to separately identify
the value of individual attributes of a good or programme. However, the CM
questionnaire needs respondents to answer complex choices or rankings between
bundles with many attributes and levels.
So, for stated preference approach, we decided to use a single-bounded (or referendum)
and a double-bounded CVM. This is because this format has become the pre-eminent
approach to contingent valuation throughout the world since mid-1990s (Garrod and
Willis, 1999). The CVM studies can actually be conducted using several elicitation
formats. Until the mid-1980s, the elicitation formats are based on open-ended questions
and iterative bidding games (with or without the use of payment cards). Problems
associated with these techniques led a number of researchers to investigate alternative
elicitation formats that did not require respondents to construct their maximum WTP for
a particular environmental good but instead asked them to choose between discrete
alternatives relating to the specification of that good and its cost. The discrete choice
question format, often known as referendum CVM becomes the most popular format of
WTP elicitation after the recommendation made by the US Department of Commerce’s
National Oceanic and Atmospheric Administration’s (NOAA) Blue-Ribbon Panel
(Arrow et al. (1993). This format only requires respondents to answer “yes” or “no” to a
given amount. It is like a market situation, where for each good the price is given, and
consumers choose whether to accept it or not. The advantage of this type of question
et al., 1993). Thus, when a respondent is asked whether they are willing to pay some
amount of money for a specific environmental improvement, and they said “yes”, it
imply that their “true” WTP for that improvement is at least that amount of money.
Even though the referendum CVM is widely used not just for research purposes but also
for policy decision making, it is still associated with some weaknesses. In order to
improve the statistical efficiency of the referendum CVM, some researchers have
proposed that a further round of bids follow the first round, with the level of the second
bid dependent upon the response to the first. Thus, an affirmative response to the first
bid amount would lead to the respondent being asked about a higher amount, while a
rejection of the first bid would lead to the second bid amount being lower. The double-
bounded model is asymptotically more efficient than the single-bounded model, as
proved by Hanemann et al. (1991).
The assumption underlying the resulting analysis is that identical value distributions are
elicited by both the initial and the follow-up questions (Cameron and Quiggin, 1994).
However, there are several studies which found that they yield WTP estimates that are
substantially different from the estimates implied by the first responses alone such as
Hanemann et al. (1991), McFadden and Leonard (1995), and Herriges and Shogren
(1996). Herriges and Shogren investigate the existence of an anchoring effect caused
by the first bid, and conclude that it affects, at least in part, the estimates. Some other
researchers investigate a “yea-saying” effect. For example, Whittington et al. (1992)
producing consistently lower estimates. There is concrete possibility that some
respondents tend to say “yes” if an answer is needed on the spot.
Calia and Strazerra (2000) used a Monte Carlo analysis in search of the bias and
efficiency of a single-bounded versus a double-bounded model. They confirmed that the
double-bounded CVM is more statistically efficient compared to the single-bounded
model. It produces more precise point estimates of parameters and central tendency
measures of the WTP, as well as narrower confidence intervals around the mean or
median WTP. On the contrary, no clear-cut results are obtained for the point estimates
given by the two models, even for a small sample size, so they conclude that neither