Proceedings of an International Year of Mountains - Australian Alps ...

Price
12
11
Consumer
surplus
attributable
to the first
glass of
water
Consumer
surplus
attributabl
able to
the second glass
of water
Consumer
surplus
attributabl
able to
the third glass of
water
10
9
8
7
6
5
4
3
2
P = 1
0
Total consumer surplus
from consuming ten
glasses of water
Demand Curve
0 1 2 3 4 5 6 7 8 9 10 11 12
Quantity
Figure 3 - Consumer Surplus
Consumer Surplus and The TCM
While there are many different versions of the TCM, the simplest (hereafter referred to as the zonal TCM)
is theoretically capable of generating an estimate of the consumer surplus (CS) attributable to recreation
at a particular area.
TCM treats the cost of travel as a proxy for price. The first stage of the TCM involves identifying the
number and origin of visitors to a recreational site, and estimating their costs in travelling from that origin
to the site and back again. This information is then used to estimate the functional relationship between
visitation rates and travel costs. Stage two of the process makes the assumption that individuals react to
changes in travel costs in the same way as they react to changes in price, and uses the function estimated
in stage one to simulate visitation responses to hypothetical changes in price. A demand curve for the
recreational area is thereby derived and used to estimate consumer surplus.
To illustrate, assume that travel costs, alone, influence visitation, that the current entry price (P) is zero.
Assume also that the research observes the number of visits (V) from each of three different ‘zones of
origin’, at a range of different travel costs (TC). These are shown in the first three columns of Table 1.
Stage one of the implementation process involves regressing V against TC to estimate wV/wTC (in this
case, negative 1). From this, one can infer that within any zone, 'V = -1 x 'TC. Stage two of the
implementation process occurs when one uses that information to predict the number of visits (from each
zone) which would obtain at higher travel costs (= TC + P):
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Celebrating Mountains – An International Year of Mountains Conference
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