IDEAS home Printed from https://ideas.repec.org/p/lug/wpaper/1004.html
   My bibliography  Save this paper

Analyzing loss aversion and diminishing sensitivity in a freight transport stated choice experiment

Author

Listed:
  • Lorenzo Masiero

    (Istituto Ricerche Economiche (IRE), Università della Svizzera Italiana, Svizzera)

  • David A. Hensher

    (Institute of Transport and Logistics Studies (ITLS), The University of Sydney, Australia)

Abstract

Choice behaviour might be determined by asymmetric preferences whether the consumers are faced with gains or losses. This paper investigates loss aversion and diminishing sensitivity, and analyzes their implications on willingness to pay and willingness to accept measures in a reference pivoted choice experiment in a freight transport framework. The results suggest a significant model fit improvement when preferences are treated as asymmetric, proving both loss aversion and diminishing sensitivity. The implications on willingness to pay and willingness to accept indicators are particular relevant showing a remarkable difference between symmetric and asymmetric model specifications. Not accounting for loss aversion and diminishing sensitivity, when present, produces misleading results and might affect significantly the policy decisions.

Suggested Citation

  • Lorenzo Masiero & David A. Hensher, 2010. "Analyzing loss aversion and diminishing sensitivity in a freight transport stated choice experiment," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1004, USI Università della Svizzera italiana.
    • Handle: RePEc:lug:wpaper:1004
    as

    Download full text from publisher

    File URL: http://doc.rero.ch/lm.php?url=1000,42,6,20100305092440-UZ/wp1004.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Simona Bolis & Rico Maggi, 2003. "Logistics Strategy and Transport Service Choices: An Adaptive Stated Preference Experiment," Growth and Change, Wiley Blackwell, vol. 34(4), pages 490-504, September.
    2. 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.
    3. David A Hensher & William H Greene & John M Rose, 2006. "Deriving Willingness-to-Pay Estimates of Travel-Time Savings from Individual-Based Parameters," Environment and Planning A, , vol. 38(12), pages 2365-2376, December.
    4. Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1039-1061.
    5. Horowitz, John K. & McConnell, Kenneth E., 2002. "A Review of WTA/WTP Studies," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 426-447, November.
    6. Rose, John M. & Bliemer, Michiel C.J. & Hensher, David A. & Collins, Andrew T., 2008. "Designing efficient stated choice experiments in the presence of reference alternatives," Transportation Research Part B: Methodological, Elsevier, vol. 42(4), pages 395-406, May.
    7. Swait, Joffre, 2001. "A non-compensatory choice model incorporating attribute cutoffs," Transportation Research Part B: Methodological, Elsevier, vol. 35(10), pages 903-928, November.
    8. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    9. 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.
    10. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
    11. Fowkes, Tony, 2007. "The design and interpretation of freight stated preference experiments seeking to elicit behavioural valuations of journey attributes," Transportation Research Part B: Methodological, Elsevier, vol. 41(9), pages 966-980, November.
    12. 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.
    13. 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.
    14. Boyce, Rebecca R, et al, 1992. "An Experimental Examination of Intrinsic Values as a," American Economic Review, American Economic Association, vol. 82(5), pages 1366-1373, December.
    15. Masiero, Lorenzo & Maggi, Rico, 2012. "Estimation of indirect cost and evaluation of protective measures for infrastructure vulnerability: A case study on the transalpine transport corridor," Transport Policy, Elsevier, vol. 20(C), pages 13-21.
    16. Puckett, Sean M. & Hensher, David A., 2008. "The role of attribute processing strategies in estimating the preferences of road freight stakeholders," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(3), pages 379-395, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lorenzo Masiero & David Hensher, 2011. "Shift of reference point and implications on behavioral reaction to gains and losses," Transportation, Springer, vol. 38(2), pages 249-271, March.
    2. Masiero, Lorenzo & Rose, John M., 2013. "The role of the reference alternative in the specification of asymmetric discrete choice models," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 53(C), pages 83-92.
    3. Ralf Elbert & Lowis Seikowsky, 2017. "The influences of behavioral biases, barriers and facilitators on the willingness of forwarders’ decision makers to modal shift from unimodal road freight transport to intermodal road–rail freight tra," Journal of Business Economics, Springer, vol. 87(8), pages 1083-1123, November.
    4. Mark J. Koetse & Roy Brouwer, 2016. "Reference Dependence Effects on WTA and WTP Value Functions and Their Disparity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(4), pages 723-745, December.
    5. Feo-Valero, María & Arencibia, Ana Isabel & Román, Concepción, 2016. "Analyzing discrepancies between willingness to pay and willingness to accept for freight transport attributes," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 89(C), pages 151-164.
    6. Hess, Stephane & Hensher, David A., 2010. "Using conditioning on observed choices to retrieve individual-specific attribute processing strategies," Transportation Research Part B: Methodological, Elsevier, vol. 44(6), pages 781-790, July.
    7. Haghani, Milad & Bliemer, Michiel C.J. & Hensher, David A., 2021. "The landscape of econometric discrete choice modelling research," Journal of choice modelling, Elsevier, vol. 40(C).
    8. John M. Rose & Lorenzo Masiero, 2010. "A comparison of prospect theory in WTP and preference space," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1006, USI Università della Svizzera italiana.
    9. Vogdrup-Schmidt, Mathias & Strange, Niels & Thorsen, Bo Jellesmark, 2019. "Support for Transnational Conservation in a Gain-Loss Context," Ecological Economics, Elsevier, vol. 162(C), pages 49-58.
    10. 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.
    11. Kim, Junghun & Seung, Hyunchan & Lee, Jongsu & Ahn, Joongha, 2020. "Asymmetric preference and loss aversion for electric vehicles: The reference-dependent choice model capturing different preference directions," Energy Economics, Elsevier, vol. 86(C).
    12. Lucia Rotaris & Romeo Danielis & Igor Sarman & Edoardo Marcucci, 2012. "Testing for nonlinearity in the choice of a freight transport service," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 50, pages 1-4.
    13. Simon Gächter & Eric J. Johnson & Andreas Herrmann, 2022. "Individual-level loss aversion in riskless and risky choices," Theory and Decision, Springer, vol. 92(3), pages 599-624, April.
    14. Li, Baibing & Hensher, David A., 2017. "Risky weighting in discrete choice," Transportation Research Part B: Methodological, Elsevier, vol. 102(C), pages 1-21.
    15. Roth, Gerrit, 2006. "Predicting the Gap between Willingness to Accept and Willingness to Pay," Munich Dissertations in Economics 4901, University of Munich, Department of Economics.
    16. Evangelinos, Christos & Tscharaktschiew, Stefan & Marcucci, Edoardo & Gatta, Valerio, 2018. "Pricing workplace parking via cash-out: Effects on modal choice and implications for transport policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 369-380.
    17. Gao, Kun & Sun, Lijun & Yang, Ying & Meng, Fanyu & Qu, Xiaobo, 2021. "Cumulative prospect theory coupled with multi-attribute decision making for modeling travel behavior," Transportation Research Part A: Policy and Practice, Elsevier, vol. 148(C), pages 1-21.
    18. Stephane Hess & Andrew Daly & Richard Batley, 2018. "Revisiting consistency with random utility maximisation: theory and implications for practical work," Theory and Decision, Springer, vol. 84(2), pages 181-204, March.
    19. Shams, Kollol & Asgari, Hamidreza & Jin, Xia, 2017. "Valuation of travel time reliability in freight transportation: A review and meta-analysis of stated preference studies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 102(C), pages 228-243.
    20. Geng, Kexin & Wang, Yacan & Cherchi, Elisabetta & Guarda, Pablo, 2023. "Commuter departure time choice behavior under congestion charge: Analysis based on cumulative prospect theory," Transportation Research Part A: Policy and Practice, Elsevier, vol. 168(C).

    More about this item

    Keywords

    freight transport; choice experiments; willingness to pay; preference asymmetry;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lug:wpaper:1004. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alessio Tutino (email available below). General contact details of provider: https://www.bul.sbu.usi.ch .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.