ESM 204 Assn 3 Taman Negara Travel Cost Problem You are part of a group project which is making recommendations regarding an increase in the entrance charge for a national park in Malaysia. The analysis below has been structured to facilitate your getting an answer for your client. You should prepare a one-page summary memo (paper copy) to your client (and the TA) outlining and justifying your recommendations, with appendices supporting these recommendations. You should also submit as backup an electronic copy of the EXCEL file containing all of your computations plus your names (send to TA using as a file name your surnames; eg: Aigner_Richardson.xls). Background Taman Negara (literally, "national park" in Malay) is one of the oldest and largest protected areas in the tropics. Established in 1938-39 during the British colonial period, it sprawls over more than 4,000 square kilometers in three states of Peninsular Malaysia: Kelantan, Pahang, and Terengganu. It is considered one of the finest and best protected conservation areas in the developing world. Its terrain ranges from lowland rainforests to the highest peak in Peninsular Malaysia, Gunung Tahan (2,187 meters). It provides habitat for numerous threatened and endangered species, including the Sumatran rhinoceros, Asian tiger, seladang (wild ox), and siamang (black gibbon). Malaysia's rapid economic growth since independence in 1957 has been accompanied by the creation of a sizable middle class. This has increased domestic demand for recreation, including demand for nature-based activities at parks like Taman Negara. Camping, hiking, and sight-seeing are the principal activities at the park. The park today attracts a roughly equal mix of Malaysian and foreign visitors. The pedagogic objectives of the project are to learn how to implement the single-site travel-cost model and to use this model to analyze recreation policy issues. In this project you will work with a dataset on domestic visitors to Taman Negara in 1991. The data are found in a separate excel workbook, Data for Malayan Travel Cost.xls. The workbook contains data organized by state of origin for Malaysian visitors. Column A gives the names of the states. Data are combined for two states, Kedah and Perlis. Wilayah Persekutuan refers to the federal territory, which includes the largest city in the country, Kuala Lumpur. Column B indicates the number of visitors from each state in 1991. Most visitors came from urban areas in those states. Column C indicates the one-way distance, by main roads and in kilometers, from the largest city in each state to the small town of Kuala Tembiling. There is no road to the park entrance. Visitors typically drive or take a bus or taxi to Kuala Tembiling and then take a boat upriver to the park entrance at Kuala Tahan. (In case you're wondering, "kuala" means river mouth in Malay.) Columns E and F provide additional information on the states. Column E shows total urban population, while column F shows average monthly income for urban adults. The income data are in ringgit. In 1991, 1 ringgit (RM) equaled approximately US$0.40.ESM 204 Assn 3 The Problem The Department of Wildlife & National Parks is concerned about the societal value of the Park (per visitor and in total) and is interested in raising the entrance fee from its current level of RM31. Your Job Submit a paper copy of a memo with four appendices (as described below) plus an electronic version of your EXCEL work. (Total points = 100) Summary Memo (20 points). Provide answers to the questions raised in the above problem statement, indicating the effect of raising the entrance fee by the average consumer surplus per visitor. What is the effect on park revenue and visitation? Is it a good idea? Write a one-page policy memo summarizing your recommendations, including justification. Back this memo up with several appendices, as indicated below. Appendix 1: Visitation rate. (20 points). Prepare two scatter plots: one of visitation rate vs. total travel cost per person; a second with visitation rate vs. monthly income per person. Each point on each plot corresponds to data from one state. Do the data in the two plots appear to be consistent with consumer theory? Hints: a. Calculate the round-trip transport cost per visitor from each state under the following assumptions: · visitors travel by automobile · there are four passengers per vehicle · average vehicle fuel efficiency is 16 kilometers per liter of petrol (gasoline) · petrol costs RM 1.04/liter. · ignore non-fuel automobile costs. b. In another column, calculate the round-trip travel-time cost per visitor from each state under the following assumptions: · average vehicle speed is 60 kilometers per hour · the average month includes 25 workdays · the average workday includes 8 hours · the opportunity cost of an hour of travel time is half the hourly wage rate. c. In another column, calculate the round-trip monetary travel cost per visitor by adding the park entrance fee, RM 31 per visitor, to the round-trip transport cost. The entrance fee covers both use of the park and the boat ride from Kuala Tembiling. d. In another column, calculate the total travel cost per visitor by adding the round-trip travel-time cost to the round-trip monetary travel cost.ESM 204 Assn 3 e. In another column, calculate the visitation rate for each state (= visitors / population). f. Prepare a scatter plot that plots visitation rate against total travel cost. g. Prepare a scatter plot that plots visitation rate against monthly income. Appendix 2: Estimating the visitation demand equation (20 Points) Generate three visitation rate equations, one depending on monetary travel cost and income, one depending on total travel cost including the opportunity cost of time and income, and one depending only total travel cost and not income. Report on the best estimate of the visitation rate equation (equation predicting the visitation rate as a function of travel cost and possibly income). Discuss, compare and contrast your results, including goodness-of-fit, interpreting the coefficients, their statistical significance and whether they have the expected sign. Should monthly income be included as an explanatory variable? Why? Hints: a. Copy the data on round-trip monetary travel cost and monthly income to two new columns. Regress visitation rate on these variables.