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

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  • 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
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    References listed on IDEAS

    as
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    14. Lorenzo Masiero & Rico Maggi, 2010. "Estimation of indirect cost and evaluation of protective measures for infrastructure vulnerability: A case study on the transalpine transport corridor," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1003, USI Università della Svizzera italiana.
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    Cited by:

    1. Mabit, Stefan L. & Cherchi, Elisabetta & Jensen, Anders F. & Jordal-Jørgensen, Jørgen, 2015. "The effect of attitudes on reference-dependent preferences: Estimation and validation for the case of alternative-fuel vehicles," Transportation Research Part A: Policy and Practice, Elsevier, vol. 82(C), pages 17-28.
    2. repec:eee:eneeco:v:65:y:2017:i:c:p:326-334 is not listed on IDEAS
    3. 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.
    4. 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.
    5. Wiktor Budziński, 2015. "The effects of non-constant marginal utility of cost for public goods valuation," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 43.
    6. Stephane Hess & Amanda Stathopoulos & Andrew Daly, 2012. "Allowing for heterogeneous decision rules in discrete choice models: an approach and four case studies," Transportation, Springer, vol. 39(3), pages 565-591, May.
    7. Guotao Hu & Aruna Sivakumar & John Polak, 2012. "Modelling travellers’ risky choice in a revealed preference context: a comparison of EUT and non-EUT approaches," Transportation, Springer, vol. 39(4), pages 825-841, July.
    8. Aravena, Claudia & Martinsson, Peter & Scarpa, Riccardo, 2014. "Does money talk? — The effect of a monetary attribute on the marginal values in a choice experiment," Energy Economics, Elsevier, vol. 44(C), pages 483-491.
    9. Bartczak, Anna & Chilton, Susan & Czajkowski, Mikołaj & Meyerhoff, Jürgen, 2017. "Gain and loss of money in a choice experiment. The impact of financial loss aversion and risk preferences on willingness to pay to avoid renewable energy externalities," Energy Economics, Elsevier, vol. 65(C), pages 326-334.
    10. repec:eee:transa:v:102:y:2017:i:c:p:228-243 is not listed on IDEAS
    11. repec:eee:juecon:v:99:y:2017:i:c:p:31-47 is not listed on IDEAS
    12. repec:eee:touman:v:52:y:2016:i:c:p:488-497 is not listed on IDEAS
    13. 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.
    14. repec:spr:jbecon:v:87:y:2017:i:8:d:10.1007_s11573-017-0847-7 is not listed on IDEAS
    15. Amanda Stathopoulos & Stephane Hess, 2011. "Referencing, Gains-Losses Asymmetry And Non-Linear Sensitivities In Commuter Decisions: One Size Does Not Fit All!," Working Papers 0511, CREI Università degli Studi Roma Tre, revised 2011.
    16. 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.
    17. 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.
    18. 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.
    19. Mesa-Arango, Rodrigo & Ukkusuri, Satish V., 2014. "Attributes driving the selection of trucking services and the quantification of the shipper’s willingness to pay," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 71(C), pages 142-158.

    More about this item

    Keywords

    freight transport; choice experiments; willingness to pay; preference asymmetry;

    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

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