Using prospect theory to investigate the low marginal value of travel time for small time changes

Katrine Hjorth and Mogens Fosgerau

MPRA Paper from University Library of Munich, Germany

Abstract: A common finding in stated preference studies that measure the value of travel time (VTT) is that the measured VTT increases with the size of the time change considered, in conflict with standard neoclassical economic theory. We present a new test of a possible explanation for the phenomenon that builds on the diminishing or constant sensitivity of the value functions in prospect theory. We use stated preference data with trade-offs between travel time and money that provide separate identification of the degrees of diminishing sensitivity for time and money gains and losses. This enables us to test and potentially falsify the prospect theory explanation. We conclude that prospect theory remains a potential explanation of the phenomenon.

Keywords: Value of travel time; Stated preference data; Prospect theory; Small time savings (search for similar items in EconPapers)
JEL-codes: C35 D12 R41 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-tre, nep-tur and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Journal Article: Using prospect theory to investigate the low marginal value of travel time for small time changes (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:42246

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