Nonlinearity and Specification of Attitudes toward Risk in Discrete Choice Models

Abstract

Recent work in travel demand modeling has sought to address decision making under risk and uncertainty by bringing together elements of expected utility theory (EUT) and random utility theory (RUT). The aims are to identify and discuss the key theoretical issues associated with the merging of EUT and RUT in a transport context and then to explore the many empirical issues associated with the specification of attitudes to risk. Specifically, the performance of the alternative specification of attitudes to risk is investigated with the use of data from a large stated-preference exercise in which respondents were faced with a series of choices between alternative unreliable train services.

Get full access to this article

View all access options for this article.

References

Avineri

and Prashker

J. N.

. Sensitivity to Uncertainty: Need for a Paradigm Shift. In Transportation Research Record: Journal of the Transportation Research Board, No. 1854, Transportation Research Board of the National Academies, Washington, D.C., 2003, pp. 90–98.

Avineri

and Prashker

J. N.

. Violations of Expected Utility Theory in Route-Choice Stated Preferences: Certainty Effect and Inflation of Small Probabilities. In Transportation Research Record: Journal of the Transportation Research Board, No. 1894, Transportation Research Board of the National Academies, Washington, D.C., 2004, pp. 222–229.

Bates

Polak

J. W.

Jones

and Cook

. The Valuation of Reliability for Personal Travel. Transportation Research E, Vol. 37, No. 2 2001, pp. 191–229.

Batley

and Daly

. Departure Time Choice under Uncertainty: A Model of Random Utility Maximisation for Wagers. Presented at European Transport Conference, Strasbourg, France, Oct. 2004.

de Palma

and Picard

. Route Choice Decision under Travel Time Uncertainty. Transportation Research A, Vol. 39, No. 4 2005, pp. 295–324.

Ettema

Tamminga

Timmermans

and Arentze

. A MicroSimulation Model System of Departure Time Using a Perception Updating Model Under Travel Time Uncertainty. Transportation Research A, Vol. 39, No. 4 2005, pp. 325–344.

Noland

R. B.

and Small

K. A.

. Travel-Time Uncertainty, Departure Time Choice, and the Cost of Morning Commutes. In Transportation Research Record 1493, TRB, National Research Council, Washington, D.C., 1995, pp. 150–158.

Noland

R. B.

Small

K. A.

Koskenoja

P. M.

and Chu

. Simulating Travel Reliability. Regional Science and Urban Economics, Vol. 28, No. 5 1998, pp. 535–564.

Recker

Chung

Y. S.

Park

J. Y.

Wang

Chen

Liu

Horrocks

and Oh

J. S.

. Considering Risk-Taking Behaviour in Travel Time Reliability. California Partners for Advanced Transit and Highways (PATH) Research Report. Institute of Transportation Studies, University of California, Berkeley, 2005.

10.

von Neumann

and Morgenstern

. Theory of Games and Economic Behavior. Princeton University Press, Princeton, N.J., 1944.

11.

Senbil

and Kitamura

. Reference Points in Commuter Departure Time Choice: A Prospect Theoretic Test of Alternative Decision Frames. Journal of Intelligent Transportation Systems, Vol. 8, No. 1 2004, pp. 19–31.

12.

Machina

Choice Under Uncertainty: Problems Solved and Unsolved. Journal of Economic Perspectives, Vol. 1, No. 1 1987, pp. 121–154.

13.

Ben-Akiva

and Lerman

S. R.

. Discrete Choice Analysis: Theory and Application to Travel Demand. MIT Press, Cambridge, Mass., 1985.

14.

Train

Discrete Choice Methods with Simulation. Cambridge University Press, Cambridge, United Kingdom, 2003.

15.

Tversky

and Kahneman

. Advances in Prospect Theory: Cumulative Representation of Uncertainty. Journal of Risk and Uncertainty, Vol. 5, 1992, pp. 297–323.

16.

Machina

and Schmeidler

. A More Robust Definition of Subjective Probability. Econometrica, Vol. 60, No. 4 1992, pp. 745–780.

17.

Starmer

Development in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice Under Risk. Journal of Economic Literature, Vol. 38, 2000, pp. 332–382.

18.

Keeney

R. L.

and Raiffa

. Decisions with Multiple Objectives. John Wiley, London, 1976.

19.

Pratt

J. W.

Risk Aversion in the Small and in the Large. Econometrica, Vol. 32, No. 2 1964, pp. 122–136.

20.

Tatineni

Boyce

D. E.

and Mirchandani

. Comparisons of Deterministic and Stochastic Traffic Loading Models. In Transportation Research Record 1607, TRB, National Research Council, Washington, D.C., 1997, pp. 16–23.

21.

Chen

and Recker

. Considering Risk-Taking Behavior in Travel Time Reliability. Presented at 80th Annual Meeting of the Transportation Research Board, Washington, D.C., 2001.

22.

Small

K. A.

The Scheduling of Consumer Activities: Work Trips. American Economic Review, Vol. 72, 1982, pp. 467–479.

23.

Vickrey

W. S.

Congestion Theory and Transport Investment. American Economic Review (Papers and Proceedings), Vol. 59, 1969, pp. 251–261.

24.

Bierlaire

BIOGEME: A Free Package for the Estimation of Discrete Choice Models. Proc., 3rd Swiss Transport Research Conference, Ascona, Switzerland, 2003. www.strc.ch/Paper/bierlaire.pdf.