The applicability of prospect theory in examining drivers’ trip decisions, in response to Electronic Road Pricing (ERP) rates adjustments - a study using travel data in Singapore

Wee Ping Koh and Kian Keong Chin

Transportation Research Part A: Policy and Practice, 2022, vol. 155, issue C, 115-127

Abstract: The Electronic Road Pricing (ERP) system in Singapore has been in operations since 1998 and has seen consistent levels of success in managing traffic in this city-state with high vehicle usage and limited land space. With the ERP rates reviewed quarterly and adjusted for the relevant 30-min periods based on speeds criteria, the volume of data collected through the years has enabled a closer look at how motorists behave with rate increases or decreases, and how these travel behaviors compare with the established consumer behavior phenomenon of loss aversions and the theory of diminished sensitivity. This paper studied 33 rate changes across 6 expressway ERP pricing gantries between the years of 2012 and 2018, and derived precise observations of travel behavior changes. The data showed that frequent car drivers tend to make more deliberate choices on whether to leave or stay on their routes. Frequent car drivers are defined as those who drive past that gantry at least 60% of the weekdays in that month (proportionally around 3 weekdays per week). We also affirmed that loss aversion theory is exhibited in road pricing through the higher demand elasticities observed from $1 rate increases as compared to the $1 rate reductions. Interestingly however, the theory of diminishing sensitivity did not seem to drive traveler’s decisions here. Instead, Singapore drivers appeared to have assessed their trip decisions based on two reference points during rate increases; a primary reference point of $2 and a reasonable reference point of $5.

Keywords: Elasticity; Road pricing; Loss aversion; Diminishing sensitivity; Travel behavior; Frequent drivers; Rate changes (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.tra.2021.11.012

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