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Modelling the role of consideration of alternatives in mode choice: An application on the Rome-Milan corridor.
In this paper, we investigate the role consideration of the alternatives plays in mode choice models. On the Rome-Milan corridor, in Italy, where seven alternative modes of transport are available, we administered a stated choice (SC) experiment. Responses to supplementary questions on consideration of the different modes of transport and the presence of thresholds for the travel time attribute indicate travellers are less likely to consider the slower modes. Two model specifications, in which consideration for the slower alternatives is measured using both sets of supplementary questions, are proposed and contrasted against a model which assumes all alternatives are considered. Our results suggests that some of the unobserved preference heterogeneity could potentially be due to consideration effects. Accounting for consideration of alternatives also has direct impacts on choice probabilities, parameter estimates and willingness-to-pay measures.
Capurso, M., Hess, S. & Dekker, T. (2019), Modelling the role of consideration of alternatives in mode choice: An application on the Rome-Milan corridor. Transportation Research Part A, 129, November 2019, Pages 170-184.
The intuition behind income effects of price changes in discrete choice models, and a simple method for measuring the compensating variation.
Small and Rosen’s (Econometrica 49(1):105–130, 1981) method for measuring consumer surplus using discrete choice models has been widely adopted in public policy analysis. For the case of a price change, the present paper elucidates five theoretical assumptions inherent within Small and Rosen’s measure, and employs indifference maps to demonstrate that this measure is only applicable to the context of a single discrete choice free of non-linear income effects. The paper argues that, where non-linear income effects are present, the aforementioned theoretical assumptions should be relaxed, and the consumption context revised from discrete choice to discrete–continuous demand. Furthermore, the paper proposes a simple analytical method for approximating the expected Hicksian compensating variation in the presence of non-linear income effects, and compares the empirical performance of this method against existing methods using data from Morey et al. (Am J Agric Econ 75(3):578–592, 1993). As well as offering a simple approximation, the proposed method yields insights on the potential range of the compensating variation depending on the extent of switching between choice alternatives, and on the attribution of the compensating variation to the relevant choice alternatives.
Batley, R., & Dekker, T. (2019). The intuition behind income effects of price changes in discrete choice models, and a simple method for measuring the compensating variation. Environmental and Resource Economics, 1-30.
Dissecting price setting efficiency in Payments for Ecosystem Services: A meta-analysis of payments for watershed services in Latin America.
Despite the increasing scholarly attention that Payments for Ecosystem Services (PES) are receiving, little is yet known about the process of price setting. This is key knowledge that relates directly to the economic efficiency of an instrument that is spreading widely worldwide. Through a meta-analysis of payments for forest watershed services in Latin America, this study finds that there exists a very substantial difference between the price that buyers pay and that sellers receive for ecosystem services and that this difference is not due to transaction costs. Instead, it reveals a substantial subsidising component. Our results would suggest that this discrepancy in prices might be due to the ‘start-up’ effect and that as programmes mature, this effect may attenuate. However, the entry of new buyers does not make over for the subsidization of schemes and would require the implementation of specific mechanisms to adjust prices. According to our results, one of such possible mechanisms would be to increase participation on price setting processes, allowing for more price negotiation between parties rather than the predominant top-down approach.
Martin-Ortega, J., Dekker, T., Ojea, E., & Lorenzo-Arribas, A. (2019). Dissecting price setting efficiency in Payments for Ecosystem Services: A meta-analysis of payments for watershed services in Latin America. Ecosystem Services, 38, 100961.
Participatory Value Evaluation: a novel method to evaluate future urban mobility investments.
Cost-Benefit Analysis (CBA) is a widely applied economic appraisal tool to support the planning and decision-making process for transport projects. However, in the planning literature CBA has been criticized for at least three reasons: 1) CBA focuses on traditional transport system related planning goals and poorly considers the broader goals of urban transport planning such as social equity; 2) CBA corrodes and degrades the forward looking nature of the planning proficiency. The instrument can be conceived as a backward looking methodology as it assumes that people’s past decisions in a (private) market setting reflect their normative ideas regarding their preferred future urban mobility system; 3) CBA fails to recognize the specific (local) features of the problem which a transport project aspires to solve as practical CBA studies use generic price tags to value impacts of a transport project. Participatory Value Evaluation (PVE) is a novel evaluation approach specifically designed to overcome these criticisms while preserving the positive aspects that CBA brings to planning. This paper illustrates the PVE method with a case study on the evaluation of a transport investment scheme of the Transport Authority Amsterdam. In total 2,498 citizens participated in the PVE. We find that projects with the highest social value focus on safety and improvements for cyclists and pedestrians, whereas projects that focus on reducing travel times for car users have lower value. Moreover, we establish that PVE captures citizens’ preferences towards broader goals of transport planning such as improving health and the environment, fostering city cycling as well as the inclusion of ethical considerations such as spatial equality. PVE also allows for the inclusion of citizens’ normative ideas regarding their preferred future urban mobility system and local characteristics of the transport problem/solution.
Mouter, N., Koster, P., & Dekker, T. (2019). Participatory Value Evaluation: a novel method to evaluate future urban mobility investments. Tinbergen Institute Discussion Paper 2019-046/VIII
New appraisal values of travel time saving and reliability in Great Britain.
This paper provides an overview of the study ‘Provision of market research for value of time savings and reliability’ undertaken by the Arup/ITS Leeds/Accent consortium for the UK Department for Transport (DfT). The paper summarises recommendations for revised national average values of in-vehicle travel time savings, reliability and time-related quality (e.g. crowding and congestion), which were developed using willingness-to-pay (WTP) methods, for a range of modes, and covering both business and non-work travel purposes. The paper examines variation in these values by characteristics of the traveller and trip, and offers insights into the uncertainties around the values, especially through the calculation of confidence intervals. With regards to non-work, our recommendations entail an increase of around 50% in values for commute, but a reduction of around 25% for other non-work—relative to previous DfT ‘WebTAG’ guidance. With regards to business, our recommendations are based on WTP, and thus represent a methodological shift away from the cost saving approach (CSA) traditionally used in WebTAG. These WTP-based business values show marked variation by distance; for trips of less than 20 miles, values are around 75% lower than previous WebTAG values; for trips of around 100 miles, WTP-based values are comparable to previous WebTAG; and for longer trips still, WTP-based values exceed those previously in WebTAG.
Batley, R.P., Bates, J., Bliemer, M., Börjesson, M., Bourdon, J., Ojeda Cabral, M., Chintakayala, P.K., Choudhury, C., Daly, A.J., Dekker, T., Drivyla, E., Fowkes, A., Hess, S., Heywood, C., Johnson, D., Laird, J., Mackie, P., Parkin, J., Sanders, S., Sheldon, R., Wardman, M. & Worsley, T. (2019), New appraisal values of travel time saving and reliability in Great Britain. Transportation, 46, Issue 3, pp 583–621.
The value of travel time, noise pollution, recreation and biodiversity: A social choice valuation perspective.
Environmental effects of transport projects have a weak position in Cost-Benefit Analysis (CBA) which might be rooted in the valuation approach adopted in the dominant style of CBA. This conventional valuation approach has been criticized for not valuing positive and negative impacts of transport projects in relation to each other and for not valuing such impacts in a public context, but in the context of private decisions. These critiques might be circumvented through valuing transport projects in a social choice context in which overall burdens and benefits of proposed transport projects are considered together in a public context. We investigate the extent to which a social choice valuation approach produces different outcomes than a conventional valuation approach. We conducted four social choice valuation experiments in which respondents were asked to choose between alternatives for a new road, trading off travel time and three environmental impacts (noise, recreation and biodiversity). Our findings suggest that, under social choice valuation, individuals assign substantially more value to environmental impacts than travel time as compared to conventional valuation studies. Moreover, in a social choice setting, respondents assigned monetary values to impacts that are not (or only qualitatively) considered in conventional CBAs of transport projects.
Mouter, N., Cabral, M. O., Dekker, T., & van Cranenburgh, S. (2019). The value of travel time, noise pollution, recreation and biodiversity: A social choice valuation perspective. Research in Transportation Economics (in press)
An introduction to Participatory Value Evaluation.
Cost-Benefit Analysis (CBA) for public policies assumes ‘consumer sovereignty’, implying that impacts of government projects can be expressed in monetary terms by aggregating individuals’ willingness to pay. However, individuals’ willingness to pay might not accurately reflect preferences towards public policies. Participatory Value Evaluation (PVE) is a novel evaluation framework specifically designed to rectify this issue by going beyond the paradigm of ‘consumer sovereignty’. PVE infers the social welfare effects of public policies through eliciting individuals’ preferences over the allocation of public budgets (‘citizen sovereignty’) as well as their private income (‘consumer sovereignty’). In a PVE, individuals are asked to choose the best portfolio of projects with corresponding impacts for society and themselves subject to
governmental and private budget constraints. This paper positions PVE relative to past innovations in applied welfare economics and illustrates the potential of the approach through a case study on projects to mitigate flood risks at locations along the Dutch river ‘Waal’. In total 2,900 citizens participated in this PVE. The main result of the case study is that citizens have a preference for projects that combine strengthening dikes and giving the river space to flood safely, particularly when such projects positively influence biodiversity and recreational opportunities.
Mouter, N., Koster, P., & Dekker, T. (2019). An introduction to Participatory Value Evaluation. Tinbergen Institute Discussion Paper 2019-024/V
The economics of participatory value evaluation.
This paper develops a novel approach to the economic evaluation of public policies: participatory value evaluation (PVE). PVE involves citizens directly in decisions of the government, taking into account governmental and individual budget constraints. Citizens receive reliable information on social impacts and can choose the best portfolio of projects according to their social preferences. This paper develops the economic and econometric theoretical framework for fixed budget and flexible budget PVE experiments which allows us to directly measure the change in social welfare for investments in water infrastructure in The Netherlands.
Dekker, T., Koster, P., & Mouter, N. (2019). The economics of participatory value evaluation. Tinbergen Institute Discussion Paper 2019-008/VIII
Allowing for heterogeneity in the consideration of airport access modes: the case of Bari airport.
Mode choice models traditionally assume that all objectively available alternatives are considered. This might not always be a reasonable assumption, even when the number of alternatives is limited. Consideration of alternatives, like many other
aspects of the decision-making process, cannot be observed by the analyst, and can only be imperfectly measured. As part of a stated choice survey aimed at unveiling air passengers’ preferences for access modes to Bari International Airport in Italy,
we collected a wide set of indicators that either directly or indirectly measure respondents’ consideration of the public transport alternatives. In our access mode choice model, consideration of public transport services was treated as a latent variable, and entered the utility function for this mode through a ‘‘discounting’’ factor. The proposed integrated choice and latent variable approach allows the analyst not only to overcome potential endogeneity and measurement error issues associated with the indicators, but also makes the model suitable for forecasting. As a result of accounting for consideration effects, we observed an improvement in fit that also held in a validation sample; moreover, the effects of policy changes aimed at improving the modal share of public transport were considerably reduced.
Bergantino, A.S., Capurso, M., Dekker, T. & Hess, S. (2019), Allowing for heterogeneity in the consideration of airport access modes: the case of Bari airport, Transportation Research Record, 2673 (8), pp. 50-61.
A disaggregate freight transport chain choice model for Europe.
This paper presents the estimation of a discrete freight transport chain choice model for Europe, which was developed for the European Union as part of the Transtools 3 project. The model describes nine different multi- and single mode chain alternatives of which three can be either container or non-containerised, and it segments freight into dry bulk, liquid bulk, containers and general cargo. The model was estimated on the basis of disaggregate data at the shipment level (Swedish CFS and French ECHO data). Several transport costs specifications and nesting structures were tested and elasticities compared with reference literature. It was found that freight models are characterised by heterogeneity, non-linearity in transport costs and hence Value of Times and non-constant rates of substitution. Not taking these elements into account will have consequences for the evaluation of transport policies using the freight transport model.
Jensen, A. F., Thorhauge, M., de Jong, G., Rich, J., Dekker, T., Johnson, D., ... & Nielsen, O. A. (2019). A disaggregate freight transport chain choice model for Europe. Transportation Research Part E: Logistics and Transportation Review, 121, 43-62.
Impact of travel time constraints on taste heterogeneity and non-linearity in simple time-cost trade-offs.
Discrete choice models are a key technique for estimating the value of travel time (VTT). Often, stated choice data are used in which respondents are presented with trade-offs between travel time and travel cost and possibly additional attributes. There is a clear possibility that some respondents experience time constraints, leaving some of the presented options unfeasible. A model not incorporating information on these constraints would explain choices for faster and more expensive options as an indication that those respondents have a higher VTT when in reality they may be forced to select the more expensive option as a result of their personal constraints. This paper puts forward the hypothesis that this can have major impacts on findings in terms of heterogeneity in VTT measures. This paper examines via simulation the bias in VTT estimates and especially preference heterogeneity when such constraints are (not) accounted for. Empirical evidence is provided that preference heterogeneity is confounded with the travel budget impact on the availabilities of alternatives, and it is shown that there is a risk of producing biased estimates for appraisal VTT if studies do not explicitly model choice set formation. The inclusion of an opt-out alternative could be an effective measure to reduce the bias. This paper also explores the potential use of non-linear functional forms to capture the time budget impacts.
Tjiong, J., Hess, S., Dekker, T. & Ojeda-Cabral, M. (2018), Impact of travel time constraints on taste heterogeneity and non-linearity in simple time-cost trade-offs, Transportation Research Record, 2672(49) 135–145.
Memory, expectation formation and scheduling choices.
Limited memory capacity, retrieval constraints and anchoring are central to expectation formation processes. We develop a model of adaptive expectations where individuals are able to store only a finite number of past experiences of a stochastic state variable. Retrieval of these experiences is probabilistic and subject to error. We apply the model to scheduling choices of commuters and demonstrate that memory constraints lead to sub-optimal choices. We analytically and numerically show how memory-based adaptive expectations may substantially increase commuters’ willingness-to-pay for reductions in travel time variability, relative to the rational expectations outcome.
Koster, P., Peer, S. & Dekker, T. (2015), Memory, expectation formation and scheduling choices. Economics of Transportation, 4 (4), pp 256-265.
The role of patients’ age on their preferences for choosing additional blood pressure-lowering drugs: a discrete choice experiment in patients with diabetes.
Objectives To assess whether patients’ willingness to add a blood pressure-lowering drug and the importance they attach to specific treatment characteristics differ among age groups in patients with type 2 diabetes. Materials and Methods Patients being prescribed at least an oral glucose-lowering and a blood pressure-lowering drug completed a questionnaire including a discrete choice experiment. This experiment contained choice sets with hypothetical blood pressure-lowering drugs and a no additional drug alternative, which differed in their characteristics (i.e. effects and intake moments). Differences in willingness to add a drug were compared between patients <75 years (non-aged) and ≥75 years (aged) using Pearson χ2-tests. Multinomial logit models were used to assess and compare the importance attached to the characteristics. Results Of the 161 patients who completed the questionnaire, 151 (72%) could be included in the analyses (mean age 68 years; 42% female). Aged patients were less willing to add a drug than non-aged patients (67% versus 84% respectively; P = 0.017). In both age groups, the effect on blood pressure was most important for choosing a drug, followed by the risk of adverse drug events and the risk of death. The effect on limitations due to stroke was only significant in the non-aged group. The effect on blood pressure was slightly more important in the non-aged than the aged group (P = 0.043). Conclusions Aged patients appear less willing to add a preventive drug than non-aged patients. The importance attached to various treatment characteristics does not seem to differ much among age groups.
de Vries, S.T., de Vries, F.M., Dekker, T., et al. (2015), The role of patients’ age on their preferences for choosing additional blood pressure-lowering drugs: a discrete choice experiment in patients with diabetes. PLOS ONE, 10 (10).
Improving value transfer through socio-economic adjustments in a multicountry choice experiment of water conservation alternatives.
This study tests the transferability of the nonmarket values of water conservation for domestic and environmental purposes across three south European countries and Australia applying a common choice experiment design. Different approaches are followed to test the transferability of the estimated values, aiming to minimise transfer errors for use in policy analysis, comparing both single‐ and multicountry transfers, with and without socio‐economic adjustments. Within Europe, significant differences are found between implicit prices for environmental water use, but not for domestic water use. In the Australian case study, alleviating restrictions on domestic water use has no significant value. Pooling the three European samples improves the transferability of the environmental flow values between Europe and Australia. Results show that a reduction in transfer error is achieved when controlling for unobserved and observed preference heterogeneity in the single‐ and multicountry transfers, providing additional support for the superiority of socio‐economic adjustment procedures in value transfer.
Brouwer, R., Martin-Ortega, J., Dekker, T., et al. (2015), Improving value transfer through socio-economic adjustments in a multicountry choice experiment of water conservation alternatives. Australian Journal of Agricultural and Resource Economics, 59 (3), pp 458-478.
Random Regret Minimization for consumer choice research.
This paper introduces to the field of marketing a regret-based discrete choice model for the analysis of multi-attribute consumer choices from multinomial choice sets. This random regret minimization (RRM) model, which has recently been introduced in the field of transport, forms a regret-based counterpart of the canonical random utility maximization (RUM) paradigm. This paper assesses empirical results based on 43 comparisons reported in peer-reviewed journal articles and book chapters, with the aim of finding out to what extent, when, and how RRM can form a viable addition to the consumer choice modeler's toolkit. The paper shows that RRM and hybrid RRM–RUM models outperform RUM counterparts in a majority of cases, in terms of model fit and predictive ability. Although differences in performance are quite small, the two paradigms often result in markedly different managerial implications due to considerable differences in, for example, market share forecasts.
Chorus, C. G., van Cranenburgh, S. & Dekker, T. (2014), Random Regret Minimization for consumer choice research. Journal of Business Research, 67, pp 2428-2436.
Changing with the tide: semi-parametric estimation of preference dynamics.
We test the discovered preference hypothesis against the theory of coherent arbitrariness in a split-sample stated choice experiment on flood risk exposure in the Netherlands. A semiparametric local multinomial logit model is proposed as an alternative method to the Swait and Louviere (1993) test procedure to control for preference dynamics in stated choice experiments. We find evidence of a declining impact over the choice sequence of an induced starting point bias in the first choice task. The results provide indicative support for convergence in preferences between both samples, which is in line with the discovered preference hypothesis.
Dekker, T., Koster, P. & Brouwer, R. (2014), Changing with the tide: semi-parametric estimation of preference dynamics. Land Economics, 90 (4), pp 717-745.
Indifference based Value of Time measures for Random Regret Minimisation models.
The notion of Value of Time (VoT) is a cornerstone of discrete choice based economic appraisal in transportation. Its derivation and interpretation in the context of Random Utility Maximisation (RUM) models with linear-additive utility functions is straightforward and well known. The choice set-composition effects and semi-compensatory behaviour emphasised in the Random Regret Minimisation (RRM) model induces deviations from this basic VoT specification. This paper reviews and provides new insights into the RRM based VoT measure developed by Chorus (2012a). It defines the theoretical properties of the measure using the micro-economic notion of indifference, and provides insights into the limitations of the measure with respect to deriving individual and aggregate welfare measures. Additionally, the representative consumer approach is adopted to derive an alternative VoT measure, which is behaviourally more complete than the Chorus (2012a) measure. Although alleviating some of the restrictions, the measure has its own theoretical disadvantage. The main contribution of the paper can therefore be summarised as the generation of the necessary insights into the extent to which RRM-based VoT measures can be applied for the purpose of economic appraisal.
Dekker, T. (2014), Indifference based Value of Time measures for Random Regret Minimisation models. Journal of Choice Modelling, 12, pp 10-20.
Incorporating needs-satisfaction in a discrete choice model of leisure activities
In this paper we extend the behavioural scope of discrete choice models for leisure activity-travel choices. More specifically, we investigate to what extent choices for leisure activities and related travels are driven by the satisfaction of needs. In addition to conventional attributes (such as activity costs), our regret based discrete choice model incorporates latent variables representing the anticipated level of individual needs-satisfaction by a particular leisure activity. The latent variables are calibrated with the help of subjective indicators of needs-satisfaction associated with the leisure activities. Results show that needs-satisfaction allows us to decompose a substantial share of the unobserved heterogeneity in leisure activity-travel decisions across respondents. Identifying the structural drivers of anticipated needs-satisfaction also enables a better prediction of leisure activity choice.
Dekker, T., Hess, S., Arentze, T. & Chorus, C.G. (2014), Incorporating needs-satisfaction in a discrete choice model of leisure activities, Journal of Transport Geography, 21, pp 36-41.
Practical solutions for sampling alternatives in large scale models.
Many large-scale real-world transport applications have choice sets that are so large as to make model estimation and application computationally impractical. The ability to estimate models on subsets of the alternatives is thus of great appeal, and correction approaches have existed since the late 1970s for the simple multinomial logit (MNL) model. However, many of these models in practice rely on nested logit specifications, for example, in the context of the joint choice of mode and destination. Recent research has put forward solutions for such generalized extreme value (GEV) structures, but these structures remain difficult to apply in practice. This paper puts forward a simplification of the GEV method for use in computationally efficient implementations of nested logit. The good performance of this approach is illustrated with simulated data, and additional insights into sampling error are also provided with different sampling strategies for MNL.
Daly, A., Hess, S. & Dekker, T. (2014), Practical solutions for sampling alternatives in large scale models. Transportation Research Record, 2429 (1), pp 148-156.