Contingent behavior and asymmetric preferences – Valuing recreational benefits of the Baltic Sea

Christine Bertram1, Heini Ahtiainen2, Jürgen Meyerhoff1,3, Kristine Pakalniete4, Eija Pouta2 & Katrin Rehdanz1,5

 

1 Kiel Institute for the World Economy (IfW), Germany

2 Natural Resources Institute Finland (Luke), Finland

3 Technische Universität (TU) Berlin, Germany

4 AktiiVS Ltd, Latvia

5 Kiel University, Germany

 

In this study, we combine information on actual and contingent recreational behavior at the Baltic Sea coast under different management scenarios to gather information about welfare implications of improvements and deteriorations in the coastal environment. We thus augment the traditional travel cost (TC) approach in which people are asked about past visits to recreation sites by asking respondents how their future recreational behavior would change if environmental conditions changed in a certain way. With this approach, termed the contingent behavior (CB) method, changes in water quality outside the range of currently observed conditions and their impact on human welfare can be examined.

Data were collected with identical surveys in Finland, Germany, and Latvia from November 2016 to February 2017. The surveys were implemented as internet surveys and computer-assisted personal interviews. In total, there were 4800 respondents, with response rates of 15-35% depending on the country. The environmental attributes considered in the hypothetical contingent behavior scenarios include water clarity, blue-green algal blooms, amounts of algae onshore, biodiversity, and facilities at the recreation site. In the survey, we additionally gathered spatially explicit information on the recreation sites which respondents had visited in the past including perceived environmental conditions. We estimate current recreational benefits and changes in recreational demand allowing for asymmetric effects of improvements and deteriorations. To evaluate future changes in environmental conditions due to climate change and eutrophication, we calculate changes in the recreational value of the Baltic Sea coast for different scenarios of environmental conditions, including a best case and a worst case scenario.

The results show substantial impacts of environmental changes on annual consumer surpluses (CS) generated in the three countries. In the best case scenario, average annual CS per visitor would increase by 23.0% in Finland, 48.8% in Germany, and 14.6% in Latvia. In the worst case scenario, in contrast, average annual CS per visitor would decrease by 45.0% in Finland, 48.8% in Germany, and 52.1% in Latvia. This reveals substantial loss aversion for the respondents in Finland and Latvia: While the sizes of perceived environmental changes are relatively similar in these countries, losses have a much larger impact on welfare than gains. However, this result does not hold for German respondents, for whom welfare changes in the best case and worst case scenario are of the same magnitude.