Estimating the effects of fee increases on participation and revenue for deer and elk hunting in Colorado

Abstract

There is an increasing trend towards user fees across a wide variety of government services, including recreation on public lands. Because user fees for recreation have historically been limited in their application, managers lack experience in charging fees. Issues that arise when implementing fees include how recreation areas and activities serve as substitutes and compliments, how participation will change in response to a fee, the amount of revenue that will be generated from the fee, how different methods of fee implementation will affect willingness to pay for the fee, and how different types of user groups respond to fees. The contingent valuation method (CVM) and an analysis of historic fee and participation data are two economic tools that can assist in addressing these issues. Refinements were made to these tools to improve their utility in addressing issues revolving around implementing fees. For the first part of this dissertation, a contingent valuation study was designed to present simultaneously resident and nonresident hunters with a randomly assigned Colorado deer and elk hunting license price. Respondents were given the option of purchasing a deer license only, an elk license only, both a deer and an elk license, or neither. Two different analyses were conducted to examine how elk and deer licenses serve as substitutes and compliments, logistic regression and crosstabs. Results of the logistic regression suggest elk hunting serves as a substitute for deer hunting, but deer hunting does not substitute for elk hunting. This analysis suggested deer hunting is a compliment to elk hunting. The crosstab analysis indicated that at low prices, elk and deer hunting serve as compliments, but as one license price is increased in relation to the other, hunters will substitute with the lower priced hunting license. For deer and elk hunting in Colorado, demand was found to be inelastic. As fees are increased, revenue to the agency will increase. However, as licenses fees increase demand eventually changes to elastic, and revenue will decrease below baseline levels at all fees. The point at which this change from inelastic demand to elastic demand occurs varies by the type of license. When an advanced draw is required, participation and revenue decrease. For both resident and nonresident deer and elk hunters, groups differing by the primary motivation of solitude, meat, or trophy did not differ in their responses to fee increases. The results of part one of the dissertation have several implications. User fees may have an undesired effect on other recreation areas or activities, either by increasing densities of use through substitution or decreasing use when the areas or activities serve as compliments. Attention should be given to the elasticity of demand to ensure fees are not set a level where revenue begins to decline. Although in this study different types of hunters responded similarly to fee increases, it is critical to examine how different groups with different motivations respond to fees. The second part of this dissertation compared results of the CVM estimates of participation and revenue for deer and elk hunting in Colorado to estimates from an analysis of historic deer and elk license price and sales data. Both methods provided iv estimates of license sales at increased fees. Since there are no actual data on license sales at these fees, one way to assess validity of the estimates is to test for convergence of the results. Estimates of elk license sales from the CVM and the historic analysis showed strong convergence. The ratio of the CVM to historic estimates ranged from .98 to 1.01 for predicted sales at fees from $40 to $70, representing a $10 to $40 increase in fees. Estimates of deer license sales from the two methods showed a similar pattern of responses; however, convergence was not strong. An explanation for why convergence varied for these two methods may be the recently changing characteristics of the deer hunts offered. The elk hunting experience in Colorado has remained relatively constant throughout recent years. In contrast, deer hunting, in recent years, has been characterized by a perception of poor quality arising from a general concern over declining herds. As a result, deer license sales have declined since 1990. It appears that when the product being offered remains similar, the different methods produce converging estimates of participation. However, when the product changes, estimates of participation do not converge as strongly. Moreover, when the product is changing, other sources of information may become more critical in estimating participation.