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Preference heterogeneity and willingness to pay for travel time

Francisco Javier Amador (), Rosa González () and Juan de Dios Ortúzar ()
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Juan de Dios Ortúzar: Pontificia Universidad Católica de Chile;Departament of Transport Engineering; Santiago; Chile

Documentos de trabajo conjunto ULL-ULPGC from Facultad de Ciencias Económicas de la ULPGC

Abstract: We examined different model specifications to detect the presence of preference heterogeneity in a mode choice context. The specification that worked best allows for both systematic and random variations in tastes. Using parameters obtained at the individual level through Bayesian inference methods, subjective values of travel time (SVT) and expected individual compensated variation were derived and aggregated to obtain measures of social welfare. Results suggest that the benefit measures, both at the individual and at the social level, are sensitive to preference heterogeneity assumptions. SVT and welfare changes derived from travel time reductions could be underestimated if the traditional assumption of taste homogeneity is made (we detected differences up to 30% in both types of measures). We also obtained an empirical value for the error made when evaluating changes in social welfare using an approximation of the expected individual compensated variation (expressed as a function of individual SVT) rather than its exact expression.

Keywords: Preference heterogeneity; subjective value of travel time; compensated variation; random parameters logit; Bayesian methods (search for similar items in EconPapers)
Pages: 26 pages
Date: 2004-12
New Economics Papers: this item is included in nep-dcm and nep-mic
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