Advanced Search
MyIDEAS: Login to save this article or follow this journal

Consistency and fungibility of monetary valuations in transport: An empirical analysis of framing and mental accounting effects

Contents:

Author Info

  • Hess, Stephane
  • Orr, Shepley
  • Sheldon, Rob
Registered author(s):

    Abstract

    Governments around the world use monetised values of transport externalities to undertake project appraisal and cost–benefit analysis. However, because different types of benefits are monetised (e.g., travel time savings, preventing statistical fatalities, reliability, etc.) the question naturally arises as to whether they are consistent. That is, whether a “dollar is a dollar” as welfare economics requires, or whether spending money in one area carries a different disutility from spending money in another area. This would equate to a violation of fungibility, which is the property of a good or a commodity whose individual units are capable of mutual substitution. The view that money is not fungible is explained in behavioural economics through theories of framing and mental accounting. This paper describes the results of a stated choice experiment designed to test the fungibility and consistency of monetary valuations in transport. From a nationally representative sample, we elicit direct values for the three pairwise trade-offs between travel time, travel cost, and safety. We then show that in the context of our analysis, any trade-offs inferred on the basis of other trade-offs, as is common practice (e.g. inferring a safety vs time trade-off on the basis of monetary valuations for time and safety), produces biased results, suggesting that the assumption of fungibility does not hold. Specifically, we find that time is valued more highly when valued directly by cost than when traded with safety, and the reverse is true for safety.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/pii/S0965856412001097
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Transportation Research Part A: Policy and Practice.

    Volume (Year): 46 (2012)
    Issue (Month): 10 ()
    Pages: 1507-1516

    as in new window
    Handle: RePEc:eee:transa:v:46:y:2012:i:10:p:1507-1516

    Contact details of provider:
    Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description

    Order Information:
    Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
    Web: https://shop.elsevier.com/order?id=547&ref=547_01_ooc_1&version=01

    Related research

    Keywords: Fungibility; Consistency; Value of time; Value of safety; Trade-offs; Stated choice;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Hess, Stephane & Rose, John M. & Hensher, David A., 2008. "Asymmetric preference formation in willingness to pay estimates in discrete choice models," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(5), pages 847-863, September.
    2. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    3. Heath, Chip & Soll, Jack B, 1996. " Mental Budgeting and Consumer Decisions," Journal of Consumer Research, University of Chicago Press, vol. 23(1), pages 40-52, June.
    4. Read, Daniel & Loewenstein, George & Rabin, Matthew, 1999. "Choice Bracketing," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 171-97, December.
    5. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, Spring.
    6. Jones-Lee, M W & Hammerton, M & Philips, P R, 1985. "The Value of Safety: Results of a National Sample Survey," Economic Journal, Royal Economic Society, vol. 95(377), pages 49-72, March.
    7. Tversky, Amos & Thaler, Richard H, 1990. "Anomalies: Preference Reversals," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 201-11, Spring.
    8. Shafir, Eldar & Thaler, Richard H., 2006. "Invest now, drink later, spend never: On the mental accounting of delayed consumption," Journal of Economic Psychology, Elsevier, vol. 27(5), pages 694-712, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:46:y:2012:i:10:p:1507-1516. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.