SENSITIVITY OF THE VALUE OF TIME TO THE SPECIFICATION OF INCOME IN DISCRETE CHOICE MODELS
Marcela Munizaga and
Articles, 2012, vol. 39, issue 2
The subjective value of time calculated from discrete choice models is shown to be quite sensitive to a cost over income variable even if the income variance is small. Considering a linear in cost specification as a basis for comparison, a cost over income specification of modal utility is used to examine analytically the variation of the cost and time coefficients for a logit model - with all the usual properties - to a small change in the income variance ; the simulated derivatives suggest that the cost coefficient changes by a substantially larger amount than the time coefficient. This is confirmed using a simulated data base for mode choice, showing that the value of travel time increases ten times as the coefficient of variation of income is increased from zero (linear in cost) to a modest 0.3. This shows the sensitivity of the value of time to the specification of income, a serious problem when using choice models for policy analysis. A practical procedure to test and a possible practical solution to this problem is also suggested.
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Persistent link: https://EconPapers.repec.org/RePEc:jte:journl:2012:2:39:3
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