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Presentation TCM

Apr 07, 2018

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    Recreation Use Value of Wondo-Genet-Ethiopia

    By: Solomon and Negasi

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    INTRODUCTION

    Wondo Genet is one of the most well-known nature-based recreation sites in Ethiopia.

    The main attractions of the site includes:

    the hot spring water for bathing andswimming;

    the forested landscape,

    streams,

    birds and other wildlife in the surroundingand

    the cafeteria, bar and bedroom services

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    Cont

    Over the past decades, considerable conversion of the

    natural ecosystem into other land uses mainly:to agriculture,

    settlement and

    plantation has occurred and

    recurrent occurrences of fire and illegaloverexploitation of timber has been going on in thesub-catchment, where the recreation site is part ofthe area suffered by the impacts.

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    Objective

    The primary objective of this study was to estimatethe recreation use value of the site

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    Method of Estimation

    vTo estimate the economic value of the recreationsite, travel cost method (TCM) is applied.

    vThere are several ways to approach the problem, but we used a simple zonal travel costapproach.

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    Cont

    vThe basic premise of the travel cost method is that the

    time and travel cost expenses that people incur tovisit a site represent the price of access to the site

    We need to calculate the cost of

    Traveling to the park (explicit cost) Time spent traveling (implicit cost)

    Then we estimate a demand function and determine the benefits

    associated with the area

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    Cont

    vHow can we calculate the cost of travelingto the site?

    Determine how far people must travel

    Determine an average cost per km

    Travel Cost = Cost ($) /km * Distance (km)

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    Cont

    vHow do we determine the cost of time spent

    traveling?

    Individuals opportunity cost of time isapproximately equal to their wage

    Cost of time spent traveling = travel time* wage

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    Zonal Travel Cost Method)

    Assume that we have

    records of the numberof visitors from each

    zip code:

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    Cont

    Assume travel cost is $0.50/km and average

    wages are $0.2/min

    Zone Round Trip TravelDistance(km)

    Round Trip TravelTime (minute)

    Cost of TravelDistance ($)

    Cost of TravelTime ($)

    Total Travel Cost($)

    A 0 0 0 0 0

    B 20 30 10 6 16

    C 40 60 20 12 32

    D 60 90 30 18 48

    E 80 120 40 24 64

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    Cont

    Regressing the number of visits as a function ofthe cost (proxy for price) we get:

    V = -3.468 * C + 248

    Using our cost data and adding different valuesfor an entrance fee, we can construct ademand curve

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    The Area under the curve can be calculated by variousmethods.

    We have tried to fit the curve using logarithmic function

    and integrated over the range.

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    Cont

    Therefore, total economic benefit ofthe site is, $63240 /year.

    ALTERNATIVE METHOD OF AREACALCULATION

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    Total Visitors/year, X Entrance fee, F ($) A=[Xn- Xn+1 ]* [ Fn+Fn+1 ]/2

    3000 0 1300.00

    2480 5 3255.00

    2046 10 4337.50

    1699 15 6064.66

    1352 20 6872.58

    1047 25 5720.00

    839 30 6760.00

    631 35 7425.00

    433 40 4420.00

    329 45 4940.00

    225 50 5460.00

    121 55 2357.50

    80 60 2187.50

    45 65 2700.00

    5 70 362.50

    0 75 0.00

    Total $64,162.24

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    Conclusion

    If we assume the investment cost is less than $63240 per year, then it is economicalto develop the site.

    If not we have to decide whether other factors make them worthwhile.

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