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Scheduling choices under rank dependent utility maximization

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    Abstract

    Rank dependent utility maximization is applied in maximizing a linear and a quadratic scheduling model considering a subjective weighting over uncertain outcomes. The optimal departure time and maximal utility are different from that under expect utility maximization in the transformed travel time density function. Probability weighting is found when estimating the linear model and the estimated weighting function suggests optimism behaviour of respondents. The results also reveal the evidence of heterogeneity in scheduling preferences. Moreover, evidence for the variable of excessive travel time beyond the traditional scheduling model specification is found even with controlling for probability weighting. Our results also show no empirical equivalence between the scheduling model and its derived forms.

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    File URL: http://www.transportportal.se/swopec/CTS2013-16.pdf
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    Bibliographic Info

    Paper provided by CTS - Centre for Transport Studies Stockholm (KTH and VTI) in its series Working papers in Transport Economics with number 2013:16.

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    Length: 35 pages
    Date of creation: 19 Sep 2013
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    Handle: RePEc:hhs:ctswps:2013_016

    Note: The abstract of this paper has been presented at the 1st European Symposium on Quantitative Methods in Transportation Systems (LATSIS) 2012 Sep. The full paper has been presented on Euro Working Group on Transportation (EWGT) 2013 Sep., and a compact version of this paper has been submitted to EWGT2013 proceeding: Elsevier Procedia - Social and Behavioral Sciences
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    Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
    Web page: http://www.kth.se/abe/om_skolan/organisation/centra/cts

    Related research

    Keywords: Scheduling models; Rank dependent utility; Risk attitudes; Heterogeneity;

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    1. Fosgerau, Mogens & Engelson, Leonid, 2010. "The value of travel time variance," MPRA Paper 42272, University Library of Munich, Germany.
    2. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    3. Small, Kenneth A, 1982. "The Scheduling of Consumer Activities: Work Trips," American Economic Review, American Economic Association, vol. 72(3), pages 467-79, June.
    4. Hensher, David A. & Greene, William H. & Li, Zheng, 2011. "Embedding risk attitude and decision weights in non-linear logit to accommodate time variability in the value of expected travel time savings," Transportation Research Part B: Methodological, Elsevier, vol. 45(7), pages 954-972, August.
    5. Börjesson, Maria & Eliasson, Jonas & Franklin, Joel, 2012. "Valuations of travel time variability in scheduling versus mean-variance models," Working papers in Transport Economics 2012:2, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    6. Fosgerau, Mogens & Karlström, Anders, 2010. "The value of reliability," Transportation Research Part B: Methodological, Elsevier, vol. 44(1), pages 38-49, January.
    7. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
    8. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
    9. Diecidue, Enrico & Wakker, Peter P, 2001. " On the Intuition of Rank-Dependent Utility," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 281-98, November.
    10. Marc Rieger & Mei Wang, 2006. "Cumulative prospect theory and the St. Petersburg paradox," Economic Theory, Springer, vol. 28(3), pages 665-679, 08.
    11. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    12. Paul Koster & Erik T. Verhoef, 2012. "A Rank-dependent Scheduling Model," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 46(1), pages 123-138, January.
    13. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
    14. Stefanie Peer & Carl Koopmans & Erik T. Verhoef, 2010. "Predicting Travel Time Variability for Cost-Benefit Analysis," Tinbergen Institute Discussion Papers 10-071/3, Tinbergen Institute.
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