EFFICIENTLY MANAGING SPATIALLY COMPETING WATER USES: NEW EVIDENCE FROM A REGIONAL RECREATION DEMAND MODEL*

ABSTRACT In arid regions, managing water efficiently among competing demands depends critically on measuring comparable economic values of each end use. Unfortunately, it has been difficult to measure recreational values of water in the arid western U.S. These difficulties result from open spaces, few sites, and low incomes typical of the region. We examine whether water used for recreation can economically compete with agriculture. We accomplish this objective by extending the travel cost model to account for conditions unique to arid environments. We use demand systems theory to estimate a regional travel cost model which accounts for travel time, substitute sites, and discretionary travel cost. Findings from New Mexico's Pecos River Basin reveal recreational values of water which are 4040 percent higher than would result from conventional travel cost methodology. Measured recreation values of $130 per acre-foot compare with equivalent values of water in irrigated agriculture of $25–$40 per acre-foot.