Abstract

In environmental valuation studies, it is commonly assumed that a utility arises from an absolute amount of environmental quality. This criterion, called absolute evaluation, is used in methods including the travel cost method and the contingent valuation method. Studies in experimental economics, however, have indicated that an individual’s criterion depends on reference dependent preference (RDP)—a relative evaluation—rather than absolute evaluation. This criterion is used mainly in analysis of biases such as framing effects or brand choice. The purpose of this paper is to construct a model for evaluating recreational benefit with RDP. The model focuses mainly on RDP for an environmental quality so as not to conflict with the axiom of choices, and the travel cost method is used as the model’s basis. First, a structure of utility function is discussed and the benefit with RDP is defined and analyzed based on the relation between the level of RDP and the magnitude of the benefit. Second, the calculating formula of the benefit is derived by the integrating-back method and tests for consistency between the results of static analysis and the numerical example are performed.

Key words: Benefit analysis, environmental quality, reference dependent preference, travel cost method.