Using prospect theory to investigate the low marginal value of travel time for small time changes
AbstractA common finding in stated preference studies that measure the value of travel time (VTT) is that the measured VTT increases with the size of the time change considered, in conflict with standard neoclassical economic theory. We present a new test of a possible explanation for the phenomenon that builds on the diminishing or constant sensitivity of the value functions in prospect theory. We use stated preference data with trade-offs between travel time and money that provide separate identification of the degrees of diminishing sensitivity for time and money gains and losses. This enables us to test and potentially falsify the prospect theory explanation. We conclude that prospect theory remains a potential explanation of the phenomenon.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 42246.
Date of creation: 2012
Date of revision:
Value of travel time; Stated preference data; Prospect theory; Small time savings;
Other versions of this item:
- Hjorth, Katrine & Fosgerau, Mogens, 2012. "Using prospect theory to investigate the low marginal value of travel time for small time changes," Transportation Research Part B: Methodological, Elsevier, vol. 46(8), pages 917-932.
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-03 (All new papers)
- NEP-TRE-2012-11-03 (Transport Economics)
- NEP-TUR-2012-11-03 (Tourism Economics)
- NEP-UPT-2012-11-03 (Utility Models & Prospect Theory)
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