Measuring the Cost of Time in Recreation Demand Analysis: An Application to Sportfishing

Since the work of Cesario and Knetsch, economists have recognized that the opportunity cost of time plays an important role in determining the demand for outdoor recreation. The opportunities one has for spare time are more significant for consumption of time-intensive outdoor recreation activities than for other commodities, especially nondurables. Bishop and Heberlein illustrate "the overwhelming importance of time costs to final [recreational] values. . . . Total consumer surplus is nearly four times as large . . . [when] time costs are added at half the income rate . . . [as when] time costs were set at zero" (p. 21). Despite the recognition, economists have neither successfully integrated the costs of time with the methods of recreational demand analysis nor reached a consensus on how it should be measured. Brown, Charbonneau, and Hay state, "Finally, the apparently crucial importance of how opportunity cost of time is handled needs further work. While we are convinced it is an appropriate concept, . . . exactly how it should be included and measured S. . remains to be determined" (p. 24). Several approaches have been taken to include it in the travel cost method. One approach (Brown and Nawas, Gum and Martin) suggests that time in transit be considered as a separate independent variable. Another approach (Bishop and Heberlein; Brown, Charbonneau, Hay; Nicols, Bowes, Dwyer; Cesario and Knetsch) measures the cost of time and adds it to other costs. Several approaches have been suggested to measure time costs. One approach is simply to choose an hourly wage, e.g., $2.00 per hour, or perhaps the minimum wage rate. A more flexible but still ad hoc approach is to use some proportion of the individual's wage rate as the opportunity cost of time (Nichols, Bowes, Dwyer). The proportion is usually taken from independent studies and used to value the travel time. This approach is better than using a constant opportunity cost of time because it allows variation across individuals. It suffers because the choice of the percentage of the wage rate is arbitrary, independent of the sampled population. Cesario has discussed the consequences of ignoring time costs and the differences in values arising from alternative measurement approaches. In this paper, we argue that the opportunity cost of time is some proportion of the individual's market wage rate or income per hour and that this proportion can be determined from sample data. This method permits the proportion to vary from one study to another, rather than imposing either an arbitrary estimate or one from a sample different from the study's sample.'