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Testing for nonlinearity in the choice of a freight transport service

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  • Lucia Rotaris
  • Romeo Danielis
  • Igor Sarman
  • Edoardo Marcucci

Abstract

Manufacturing firms buy transport services with the aim of minimizing their total logistics cost. There is a large amount of literature analyzing how shippers value the various characteristics of a transport service, mostly performed by collecting stated-preference data and estimating discrete choice models. Most of the empirical studies specify the deterministic part of the utility functions as linear in the observed attributes. This implicitly constrains the characteristics of the analyzed transport service to be perfect substitutes, and to have a constant substitutability ratio. Such an assumption is inconsistent with the standard microeconomic theory, typically assuming inputs’ decreasing marginal productivity, and may not be realistic. The paper tests the linearity assumption for freight rate, travel time, probability of having damaged and lost freight, frequency, flexibility, mode and punctuality on a sample of Italian small- and medium-sized manufacturing enterprises (SME). Our findings suggest that the linearity-in-the-attributes assumption should be rejected and that the marginal impact on the utility-of-profit of the attributes is not constant. More specifically travel time and freight rate produce decreasing marginal reductions of the utility-of-profit; while safety (percentage of not damaged or lost shipments) and punctuality (percentage of shipments on time) are responsible for increasing marginal contributions to the utility-of-profit. The substitutability ratios between (a) freight rate and loss and damage, (b) freight rate and travel time, (c) freight rate and punctuality, (d) travel time and damage and loss and (e) travel time and punctuality are estimated and found not constant. Finally, it is found that the willingness to pay for the qualitative attributes obtained with a linearly specified model tend to be overestimated.

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Bibliographic Info

Article provided by ISTIEE, Institute for the Study of Transport within the European Economic Integration in its journal European Transport / Trasporti Europei.

Volume (Year): (2012)
Issue (Month): 50 ()
Pages: 4

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Handle: RePEc:sot:journl:y:2012:i:50:p:4

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Keywords: discrete choice models; nonlinearity; freight transport demand;

References

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  1. Danielis, Romeo & Marcucci, Edoardo, 2007. "Attribute cut-offs in freight service selection," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 43(5), pages 506-515, September.
  2. Nijkamp, Peter & Reggiani, Aura & Tsang, Wai Fai, 2004. "Comparative modelling of interregional transport flows: Applications to multimodal European freight transport," European Journal of Operational Research, Elsevier, vol. 155(3), pages 584-602, June.
  3. Duncan, Gregory M, 1980. "Formulation and Statistical Analysis of the Mixed, Continuous/Discrete Dependent Variable Model in Classical Production Theory," Econometrica, Econometric Society, vol. 48(4), pages 839-52, May.
  4. De Borger, Bruno & Fosgerau, Mogens, 2007. "Discrete choices and the trade-off between money and time: A test of the theory of reference-dependent preferences," MPRA Paper 3904, University Library of Munich, Germany.
  5. Danielis, Romeo & Marcucci, Edoardo & Rotaris, Lucia, 2005. "Logistics managers' stated preferences for freight service attributes," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 41(3), pages 201-215, May.
  6. Wardman, Mark, 2004. "Public transport values of time," Transport Policy, Elsevier, vol. 11(4), pages 363-377, October.
  7. Winston, Clifford, 1981. "A Disaggregate Model of the Demand for Intercity Freight Transportation," Econometrica, Econometric Society, vol. 49(4), pages 981-1006, June.
  8. Álvarez, Óscar & Cantos, Pedro & Garci­a, Leandro, 2007. "The value of time and transport policies in a parallel road network," Transport Policy, Elsevier, vol. 14(5), pages 366-376, September.
  9. Hanemann, W. Michael & Tsur, Yacov, 1982. "Econometric Models of Discrete/Continuous Supply Decisions under Uncertainty," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2m92m79x, Department of Agricultural & Resource Economics, UC Berkeley.
  10. Masiero, Lorenzo & Hensher, David A., 2010. "Analyzing loss aversion and diminishing sensitivity in a freight transport stated choice experiment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(5), pages 349-358, June.
  11. Simona Bolis & Rico Maggi, 2003. "Logistics Strategy and Transport Service Choices: An Adaptive Stated Preference Experiment," Growth and Change, Gatton College of Business and Economics, University of Kentucky, vol. 34(4), pages 490-504.
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Cited by:
  1. Stathopoulos, Amanda & Hess, Stephane, 2012. "Revisiting reference point formation, gains–losses asymmetry and non-linear sensitivities with an emphasis on attribute specific treatment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(10), pages 1673-1689.
  2. Amanda Stathopoulos & Stephane Hess, 2011. "Referencing, Gains-Losses Asymmetry And Non-Linear Sensitivities In Commuter Decisions: One Size Does Not Fit All!," Working Papers 0511, CREI Università degli Studi Roma Tre, revised 2011.

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