ECO 605: Module Four Case Study Guidelines and Rubric
Overview: The case studies in this course are designed to actively involve you in environmental economics reasoning and to help you apply the
course principles to complex real-world situations. In the case studies, you will use data analysis to make informed recommendations and
communicate in a professional manner.
The Module Four Case Study examines data with the travel cost method. In your submission, you will demonstrate the following skills:
1.
2.
3.
4.
5.
6.
Apply an appropriate type of cost-benefit analysis and compare it to the contingent valuation method.
Define the collection source for data.
Collect data on the number of visitors from each zone and the number of visits made in the last year.
Calculate visitation rates.
Calculate the average round-trip travel distance and travel time for each zone.
Write recommendations for an influential association of homeowners and businesses and describe the advantages of the travel cost
method over other methods.
7. Construct the demand function with the use of results from regression analysis.
8. Write a summary of the benefit-cost analysis on programs to control pollution.
Prompt: The objective of this case study is to analyze data and make recommendations for the improvement of the water quality in a local lake.
Describe the required data and the rationale for using the travel cost method. Prepare your analysis as though you were hired by an influential
association of homeowners and businesses that are interested in the local lake’s water quality. The analysis and recommendations you provide
will help determine the benefits for improving the water quality of the lake. You must take the steps listed below to complete this case study.
Step 1
Describe the rationale for using the travel cost method. Compare the travel cost method to the contingent valuation method in your
description.
Step 2
Define the zones surrounding the lake. These may be defined by concentric circles around the lake or by geographic divisions.
Choose what makes sense, such as counties or other distinguishable boundaries that surround the lake at different distances. Add a
graphic to enhance the definition and description.
Step 3
Explain how you will collect data. Focus on the number of visitors from each zone and the number of visits made in the last year. For
this example, assume the staff at the lake has records of the number of visitors and their zip codes. This will be used to calculate the
total number of visits per zone over the last year. To extend the value of the analysis, explain the value of more precise data and
what it takes to analyze this additional data. More information on this approach is found on the companion website to the course
textbook (relevant pages for Chapter 7).
Step 4
Calculate the visitation rates per 1,000 population in each zone. These are the total visits per year designated by each zone, divided
by the zone’s population in thousands. An example is shown below. Use Microsoft Excel (or something similar) to calculate the rates.
Visitation Rates per 1,000 Population
Zone
Total
Visits/Year
Zone
Population
Visits/1,000
0
400
1,000
400
1
400
2,000
200
2
400
4,000
100
3
400
8,000
50
Beyond 3
Total Visits
0
1,600
Step 5
Calculate the average round-trip travel distance and travel time for each zone. Assume that people in Zone 0 have a travel distance
and time of zero. Every other zone has increasing travel time and distance. Next, using average cost per mile and per hour of travel
time, calculate the travel cost per trip. A standard cost per mile for operating an automobile is readily available from AAA or similar
sources. Assume that cost per mile is $.30, or use the current expense rate found on the IRS website. The cost of time is more
complicated. The simplest approach is to use the average hourly wage. For this example, assume it is $9 per hour (or $.15 per
minute) for all zones, although in practice it is likely to differ by zone. Generate calculations using Microsoft Excel or a similar
program.
Zone
Average Round-Trip Travel Distance and Travel Time
Round-Trip Travel
Round-Trip
Distance Times Travel Time
Distance
Travel Time
Cost/Mile
Times
($.30)
Cost/Minute
($.15)
0
0
0
1
20
2
40
3
80
Total
Travel
Cost/Trip
0
0
0
30
$6
$4.50
$10.50
60
$12
$9.00
$21.00
120
$24
$18.00
$42.00
For additional practice, add one to two more zones with additional data.
Step 6
To estimate using regression analysis, use an equation that relates visits per capita to travel costs and other important variables.
From this, estimate the demand function for the average visitor. In this simple model, the analysis might include demographic
variables, such as age, income, gender, and education levels, using the average values for each zone. To maintain the simplest
possible model, calculate the equation with only the travel cost and visits/1,000.
Visits/1,000 = 330 – 7.755*(Travel Cost)
Step 7
Construct the demand function for visits to the lake, using the results of the regression analysis. The first point on the demand curve
is the total visitors to the lake at current access costs (assuming there is no entry fee for the lake), which in this example is 1,600
visits per year. The other points are found by estimating the number of visitors with different hypothetical entrance fees (assuming
that an entrance fee is viewed in the same way as travel costs). Enter the total number of visits.
Demand Function
Visits/1,000
Population
Zone
Travel Cost plus
$10
Total Visits
0
$10
252
1,000
252
1
$20.50
171
2,000
342
2
$31.00
90
4,000
360
3
$52.00
0
8,000
0
Total Visits
For additional practice, add one to two more sets of data.
This gives the second point on the demand curve (enter the sum of the total visits into the gray shaded area). Use the total number
of visits and multiply it by an entry fee of $10. Then calculate in the same way for the number of visits at each of the increasing entry
fees to get the totals listed below. (Use a program such as Microsoft Excel to enter data and then plot a graph.)
Entry Fee
Total Visits
$20
409
$30
129
$40
20
$50
0
These points give the demand curve for trips to the lake.
Step 8
Now estimate the total economic benefit of the lake by calculating the consumer surplus (or the area under the demand curve). This
results in a total estimate of economic benefits from the lake uses around $23,000 per year, or around $14.38 per visit
($23,000/1,600). Remember that the objective is to determine whether it is worthwhile to spend money to protect the lake by
implementing programs to improve the water quality. If the actions cost less than $23,000 per year, the cost will be less than the
benefits provided by the lake. If the costs are greater, the staff will decide whether other factors are worthwhile. You should make
recommendations that will influence a decision on whether it is worthwhile to spend money on programs to improve the water
quality of the lake over the long run and the short run. Also make recommendations on the additional information to gather in a
survey to enhance this study. Create a report with recommendations based on your analysis.
Rubric
Guidelines for Submission: The case study must follow these formatting guidelines: double spacing, 12-point Times New Roman font, one-inch
margins, and APA citations. Your submission should be one to two pages in length (not including cover page and references).
Critical Elements
Rationale
Zones
Data Collection
Exemplary (100%)
Meets “Proficient” criteria
and extends with compelling
rationale on the benefits of
the travel cost method with
a comparison to other
methods, such as contingent
valuation
Meets “Proficient” criteria
and extends by defining the
source of the data from the
surrounding area and
incorporates a graphic with
concentric circles from
around the lake
Meets “Proficient” criteria
and extends the reports
value by describing
additional data to be
collected that would
enhance the current data
and analysis value
Proficient (90%)
Introduces the report with a
clear description on the
rationale for the use of the
travel cost method
Defines the zones
surrounding the lake
Describes the collection of
data using the example of
the lake staff providing
records of the number of
visitors and their zip codes as
part of the visits per zone
Needs Improvement (70%)
Attempts to introduce the
report with a rationale for
the use of the method for
the analysis, but the
description is not clearly
explained or it is missing
correct information
Attempts to define the zones
surrounding the lake, but at
least one detail is incorrect
Not Evident (0%)
There is no evidence or
rationale for the method
used in this report
Value
10
The definition of the zones is
incorrect or missing
completely
10
Attempts to describe the
collection of data, but there
is an error or missing
information
There is no attempt to
describe the data collected
10
Visitation Rates
Travel Cost per Trip
Estimation
Demand Function
Total Economic
Benefit
Meets “Proficient” criteria
and extends the calculations
with additional relevant data
and adds it to the graph of
the zones and visits/1,000
Meets “Proficient” criteria
and extends to include
additional data that
enhances the graph
Meets “Proficient” criteria
and extends calculations and
the regression analysis to
include more variables that
go beyond the simplest
travel cost and visits/1,000
Meets “Proficient” criteria
and extends demand
function for visits to the lake
by adding supporting data to
enhance the graph
Meets “Proficient” criteria
and extends to include
additional recommendations
that enhance this analysis
with good questions to ask
for more data to improve
the analysis
Generates accurate
calculations of the data with
the use of a program such as
Excel and generates a graph
of the zones and visits/1,000
Calculates the travel costs
and trips by zone using the
data provided with the use
of a program such as Excel to
generate a representation of
the information in a graph
Estimates using the
regression analysis of the
visits per capita to travel
costs and other important
variables
Constructs the demand
function for visits to the lake
using the results from the
regression analysis; enters
data into a program such as
Excel and creates a graph to
represent the data and
regression analysis
Uses the data provided to
create a summary of the
benefit-cost analysis with
recommendations on shortrun and long-run costs of
programs that will control
pollution; writes in a way
that will influence a target
audience of homeowners
and businesses
Attempts to generate
calculations of the data with
the use of a program such as
Excel, but there are errors in
the data or the graph
Attempts to calculate the
travel costs and trips by zone
using the data provided, but
there is an error in the data
or graph
There is no analysis or
proper use of the data
10
There is no calculation of the
travel costs and trip by zone
or no graph
10
Attempts to use regression
analysis of the visits per
capita to travel costs and
other variables, but there is
an error in the equation or
the use of data
Attempts to construct the
demand function for visits to
the lake, but the data has
errors or there is no graph to
represent the data and
regression analysis
There is no regression
analysis of the visits per
capita to travel costs
10
There is no construct
demand function for visits to
the lake
10
Attempts to use the data in
the analysis, but at least one
data source is not identified
or is used incorrectly
There is no analysis or data
used correctly to make
accurate recommendations
20
Articulation of
Response
Submission is free of errors
related to citations,
grammar, spelling, syntax,
and organization and is
presented in a professional
and easy to read format
Submission has no major
errors related to citations,
grammar, spelling, syntax, or
organization
Submission has major errors
related to citations,
grammar, spelling, syntax, or
organization that negatively
impact readability and
articulation of main ideas
Submission has critical errors
related to citations,
grammar, spelling, syntax, or
organization that prevent
understanding of ideas
Earned Total
10
100%

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