Two-Constraints Models of Consumer Demand: An Application to the Demand for Agritourism in the United States

Abstract

This dissertation comprises three essays analyzing the economic behavior of customers visiting farms with recreational purposes in the United States. The first essay uses the Travel Cost method with data from the 2000 National Survey on Recreation and the Environment to determine and quantify the effect of the different factors affecting customers' decisions to visit United States farms for recreational purposes. The estimates of the own price elasticity and income elasticity of farm recreational trips are -0.13 and 0.06, respectively. The total consumer surplus generated from the agricultural landscape was estimated in around 25 billion dollars, which is about one half of the last 10 years average of the US total net farm income, calculated in around 50 billion dollars.

The second and third essays develop two different methods to analyze consumer behavior of individuals when time is an important component of the decision process. The inclusion of the time dimension into the consumer problem is motivated by the analysis of consumer behavior of one specific type of agritourism: pick-your-own (PYO) activities. The inclusion of the time dimension is necessary in this context since the purchase of PYO fruit involves both time and money costs. Moreover, the time spent harvesting the fruit is perceived by most of the customers as a recreational activity.

The second essay develops a fully structural econometric consumer demand model. The third essay considers the problem from a different perspective and assumes a deterministic decision framework. Based in the comparative statics of the solutions to this optimization problem, a theoretical consistent incomplete demand system of equations is proposed.

The models are used to analyze customers' decision to buy pick-your-own versus pre-harvested fruit at North Carolina pick-your-own fruit operations. The empirical application distinguishes the double effect of time as a resource constraint and also providing utility. Elasticity estimates show that strawberries sold at pick-your-own operations are price elastic, with pick-your-own fruit being less price elastic than pre-harvested fruit.