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Using prospect theory to investigate the low marginal value of travel time for small time changes

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  • Hjorth, Katrine
  • Fosgerau, Mogens

Abstract

A 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.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:transb:v:46:y:2012:i:8:p:917-932
    DOI: 10.1016/j.trb.2012.04.001
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    References listed on IDEAS

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    1. Axhausen, Kay W. & Hess, Stephane & König, Arnd & Abay, Georg & Bates, John J. & Bierlaire, Michel, 2008. "Income and distance elasticities of values of travel time savings: New Swiss results," Transport Policy, Elsevier, vol. 15(3), pages 173-185, May.
    2. Wakker,Peter P., 2010. "Prospect Theory," Cambridge Books, Cambridge University Press, number 9780521765015, May.
    3. Cantillo, Víctor & Heydecker, Benjamin & de Dios Ortúzar, Juan, 2006. "A discrete choice model incorporating thresholds for perception in attribute values," Transportation Research Part B: Methodological, Elsevier, vol. 40(9), pages 807-825, November.
    4. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, May.
    5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    6. Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1039-1061.
    7. Fosgerau, Mogens, 2007. "Using nonparametrics to specify a model to measure the value of travel time," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(9), pages 842-856, November.
    8. Lars Hultkrantz & Reza Mortazavi, 2001. "Anomalies in the Value of Travel-Time Changes," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 285-299, May.
    9. Henry Stott, 2006. "Cumulative prospect theory's functional menagerie," Journal of Risk and Uncertainty, Springer, vol. 32(2), pages 101-130, March.
    10. De Borger, Bruno & Fosgerau, Mogens, 2008. "The trade-off between money and travel time: A test of the theory of reference-dependent preferences," Journal of Urban Economics, Elsevier, vol. 64(1), pages 101-115, July.
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    Citations

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    Cited by:

    1. Koster, Paul R. & Koster, Hans R.A., 2015. "Commuters’ preferences for fast and reliable travel: A semi-parametric estimation approach," Transportation Research Part B: Methodological, Elsevier, vol. 81(P1), pages 289-301.
    2. Paul Koster & Hans Koster, 2013. "Commuters' Preferences for Fast and Reliable Travel," Tinbergen Institute Discussion Papers 13-075/VIII, Tinbergen Institute, revised 30 Apr 2015.
    3. Obermeyer, Andy & Treiber, Martin & Evangelinos, Christos, 2015. "On the identification of thresholds in travel choice modelling," Journal of choice modelling, Elsevier, vol. 17(C), pages 1-9.
    4. Wiktor Budziński & Danny Campbell & Mikołaj Czajkowski & Urška Demšar & Nick Hanley, 2016. "Using geographically weighted choice models to account for spatial heterogeneity of preferences," Working Papers 2016-17, Faculty of Economic Sciences, University of Warsaw.
    5. Maria Börjesson, 2014. "Inter-temporal variation in the travel time and travel cost parameters of transport models," Transportation, Springer, vol. 41(2), pages 377-396, March.
    6. Small, Kenneth A., 2012. "Valuation of travel time," Economics of Transportation, Elsevier, vol. 1(1), pages 2-14.
    7. Kemel, Emmanuel & Paraschiv, Corina, 2013. "Prospect Theory for joint time and money consequences in risk and ambiguity," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 81-95.
    8. Chen, Peng & Nie, Yu (Marco), 2013. "Bicriterion shortest path problem with a general nonadditive cost," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 419-435.
    9. Hess, Stephane & Daly, Andrew & Dekker, Thijs & Cabral, Manuel Ojeda & Batley, Richard, 2017. "A framework for capturing heterogeneity, heteroskedasticity, non-linearity, reference dependence and design artefacts in value of time research," Transportation Research Part B: Methodological, Elsevier, vol. 96(C), pages 126-149.

    More about this item

    Keywords

    Value of travel time; Stated preference data; Prospect theory; Small time savings;

    JEL classification:

    • 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; Travel Time; Safety and Accidents; Transportation Noise

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