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Using nonparametrics to specify a model to measure the value of travel time

  • Fosgerau, Mogens

Using a range of nonparametric methods, the paper examines the specification of a model to evaluate the willingness-to-pay (WTP) for travel time changes from binomial choice data from a simple time-cost trading experiment. The analysis favours a model with random WTP as the only source of randomness over a model with fixed WTP which is linear in time and cost and has an additive random error term. Results further indicate that the distribution of log WTP can be described as a sum of a linear index fixing the location of the log WTP distribution and an independent random variable representing unobserved heterogeneity. This formulation is useful for parametric modelling. The index indicates that the WTP varies systematically with income and other individual characteristics. The WTP varies also with the time difference presented in the experiment which is in contradiction of standard utility theory.

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File URL: http://mpra.ub.uni-muenchen.de/12009/1/MPRA_paper_12009.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12009.

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Date of creation: 2007
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Publication status: Published in Transportation Research Part A 9.41(2008): pp. 842-856
Handle: RePEc:pra:mprapa:12009
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  1. Fosgerau, Mogens & Bierlaire, Michel, 2007. "A practical test for the choice of mixing distribution in discrete choice models," Transportation Research Part B: Methodological, Elsevier, vol. 41(7), pages 784-794, August.
  2. Mogens Fosgerau, 2005. "Unit income elasticity of the value of travel time savings," Urban/Regional 0508007, EconWPA.
  3. DeSerpa, A C, 1971. "A Theory of the Economics of Time," Economic Journal, Royal Economic Society, vol. 81(324), pages 828-46, December.
  4. Klein, Roger W & Spady, Richard H, 1993. "An Efficient Semiparametric Estimator for Binary Response Models," Econometrica, Econometric Society, vol. 61(2), pages 387-421, March.
  5. McConnell, K. E., 1990. "Models for referendum data: The structure of discrete choice models for contingent valuation," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 19-34, January.
  6. Cameron, Trudy Ann & James, Michelle D, 1987. "Efficient Estimation Methods for "Closed-ended' Contingent Valuation Surveys," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 269-76, May.
  7. Mogens Fosgerau, 2004. "Investigating the distribution of the value of travel time savings," Urban/Regional 0411006, EconWPA.
  8. Bateman, Ian J, et al, 1997. "A Test of the Theory of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 479-505, May.
  9. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
  10. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  11. repec:cup:cbooks:9780521586115 is not listed on IDEAS
  12. Lars Hultkrantz & Reza Mortazavi, 2001. "Anomalies in the Value of Travel-Time Changes," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(2), pages 285-299, May.
  13. repec:cup:cbooks:9780521812832 is not listed on IDEAS
  14. 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.
  15. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
  16. repec:cup:cbooks:9780521355643 is not listed on IDEAS
  17. repec:cup:cbooks:9780521012263 is not listed on IDEAS
  18. Horowitz, Joel L., 1993. "Semiparametric estimation of a work-trip mode choice model," Journal of Econometrics, Elsevier, vol. 58(1-2), pages 49-70, July.
  19. Train, K. & Weeks, M., 2004. "Discrete Choice Models in Preference Space and Willingness-to Pay Space," Cambridge Working Papers in Economics 0443, Faculty of Economics, University of Cambridge.
  20. David A. Hensher, 2001. "Measurement of the Valuation of Travel Time Savings," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(1), pages 71-98, January.
  21. John Xu Zheng, 1996. "A consistent test of functional form via nonparametric estimation techniques," Journal of Econometrics, Elsevier, vol. 75(2), pages 263-289, December.
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