Non-Market Goods - Cost-Benefit Analysis
Smith, S. L. J. 1995. Impact and Evaluation Methods. In
Tourism Analysis: A Handbook. Essex, Longman Group
Limited. Second Edition: 273-302. This chapter reviews various impact and evaluation methods available for
analyzing tourism. This summary will focus on two particular methods:
conversion studies and cost-benefit analysis. Conversion studies look to
measure the effectiveness of tourism advertising by basically answering the
question of how many tourists did a specific advertisement (or advertisement
campaign) bring to the destination. Conversion studies rely exclusively on
surveys of people who may have seen the advertisement. However, these studies
are fraught with challenges and often conducted with shoddy, self-serving
research techniques. Problems include: failure to consider full range of
factors in traveling decision; small sample size; non-response bias; poor
sample distribution; failure to include all advertising costs; over-reliance
on expenditure recall by memory; and failure to inquire why someone is
requesting information. A cost-benefit analysis is a hypothetical experiment
which asks whether society will be better off after the implementation of the
proposed project. Cost-benefit analysis is used in four different context to
determine: whether a project is feasible; the appropriate size of a project;
which of several competing projects is most appropriate; and setting the
development schedule of a set of projects. Curry, S. 1994. Cost-Benefit Analysis. Tourism Marketing and Management
Handbook. Stephen F. Witt and Luiz Moutinho (ed.), New York, Prentice Hall
Second Edition: 504-509. This chapter describes the technique of cost-benefit analysis and its use
in tourism research. Essentially cost-benefit analysis is a technique for
assessing the viability of a new investments or expenditure programs. In a
cost-benefit analysis the costs and benefits in every year of a project are
calculated and the present discounted costs are evaluated against the present
discounted benefits. An important consideration sis determining the scope of
the cost-benefit analysis. Is it narrow in scope and being conducted for
purely for the investors in the project or is much broader in scope, evaluated
from the publics perspective, with consideration for indirect and
environmental effects. The chapter includes a brief discussion of how to
properly valuate the costs and benefits under different assumptions.
Methodology -
Lake State Examples -
Other Examples
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Methodology:
Lake States
Examples: Samples, K. C.
and R. C. Bishop. 1981. The Lake Michigan Angler: A Wisconsin Profile.
Madison, WI: University of Wisconsin Sea Grant Institute, Department of
Agricultural Economics, Center for Resource Policy Studies, University of
Wisconsin-Madison. This report builds a profile of the Wisconsin Lake Michigan angler.
Included in the report is a section on the economic impacts of the angler. In
1978, Lake Michigan anglers in Wisconsin spent a total of $16.4 million on
their angling pursuit. Of that, $9.8 million was spent in Wisconsin coastal
counties and $1.8 million in other Wisconsin counties. A cost-benefit analysis
of government expenditures to angler consumer surplus, calculated by
willingness to pay, is also calculated. The study concludes that there were
$2.5 million in government expenditures on Lake Michigan angling in 1978,
while anglers derived a consumer surplus of $7.2 million. This is a return on
government investment of $2.8 to every one dollar invested.
Other Examples:
Fleischer, A. and D. Felsenstein. 2000. "Support for Rural
Tourism: Does it Make a Difference?" Annals of Tourism Research 27(4):1007-1024. This study uses cost-benefit analysis to analyze the financial support by
public agencies of small-scale tourism businesses in rural areas of Israel.
When compared to other small-business types, support for tourism businesses is
more cost effective. While both tourism and other establishments yield
favorable cost-benefit rations and net present values per job, those of the
former are consistently higher. This position is further strengthened on
welfare grounds, as income distribution impacts of the support program being
analyses revealed a more pronounced effect among the tourism firms.