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Prospect Theoretic Contributions in Understanding Traveller Behaviour: A Review and Some Comments

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  • Zheng Li
  • David Hensher

Abstract

Over the last 15 years we have seen a small but growing interest in Prospect Theory (PT) as an alternative behavioural paradigm within which to represent traveller behaviour. Some elements of PT such as gains and losses have become so popular in travel choice studies that authors increasingly indicate that they are applying PT. In its strictest interpretation, PT has a number of essential elements that must be included if the link with PT can be claimed. This paper reviews recent transportation studies which report an association with PT as a way of gaining a greater appreciation of what is and what is not an application of PT. We set the scene by providing an overview of PT using studies in the fields of psychology and behavioural economics, where PT was originally established and further developed, and then identify travel behaviour studies which satisfy the PT (Original or Cumulative PT) conditions. A number of specific issues are identified to highlight the connection to PT, including empirically estimated prospect theoretic parameters and referencing. Some behavioural limitations of the reviewed transport PT studies are also presented, including the absence of willingness to pay estimates and consideration of unobserved between‐individual heterogeneity.

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  • Zheng Li & David Hensher, 2010. "Prospect Theoretic Contributions in Understanding Traveller Behaviour: A Review and Some Comments," Transport Reviews, Taylor & Francis Journals, vol. 31(1), pages 97-115, May.
    • Handle: RePEc:taf:transr:v:31:y:2010:i:1:p:97-115
    DOI: 10.1080/01441647.2010.498589
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    1. Andersen, Steffen & Harrison, Glenn W. & Hole, Arne Risa & Rutström, Elisabet E., 2009. "Non-Linear Mixed Logit and the Characterization of Individual Heterogeneity," Working Papers 06-2009, Copenhagen Business School, Department of Economics.
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    Cited by:

    1. Mark J. Koetse, 2017. "Effects of payment vehicle non-attendance in choice experiments on value estimates and the WTA–WTP disparity," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 6(3), pages 225-245, July.
    2. Jou, Rong-Chang & Chen, Ke-Hong, 2013. "An application of cumulative prospect theory to freeway drivers’ route choice behaviours," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 123-131.

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