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Preference heterogeneity and willingness to pay for travel time

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Author Info
Francisco Javier Amador () (Universidad de La Laguna; Instituto Universitario de Desarrollo Regional and Departamento de Análisis Económico; Tenerife; Spain)
Rosa Marina González () (Universidad de La Laguna; Instituto Universitario de Desarrollo Regional and Departamento de Análisis Económico; Tenerife; Spain)
Juan de Dios Ortúzar () (Pontificia Universidad Católica de Chile;Departament of Transport Engineering; Santiago; Chile)
Abstract

We examined different model specifications to detect the presence of preference heterogeneity in a mode choice context. The specification that worked best allows for both systematic and random variations in tastes. Using parameters obtained at the individual level through Bayesian inference methods, subjective values of travel time (SVT) and expected individual compensated variation were derived and aggregated to obtain measures of social welfare. Results suggest that the benefit measures, both at the individual and at the social level, are sensitive to preference heterogeneity assumptions. SVT and welfare changes derived from travel time reductions could be underestimated if the traditional assumption of taste homogeneity is made (we detected differences up to 30% in both types of measures). We also obtained an empirical value for the error made when evaluating changes in social welfare using an approximation of the expected individual compensated variation (expressed as a function of individual SVT) rather than its exact expression.

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Paper provided by Facultad de Ciencias Económicas de la ULPGC in its series Documentos de trabajo conjunto ULL-ULPGC with number 2004-12.

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Length: 26 pages
Date of creation: Dec 2004
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Handle: RePEc:can:series:2004-12

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Related research
Keywords: Preference heterogeneity; subjective value of travel time; compensated variation; random parameters logit; Bayesian methods;

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