The Sensitivity of the Valuation of Travel Time Savings to the Specification of Unobserved Effects

Abstract

The behavioural value of travel time savings (VTTS) remains a controversial data item in the evaluation of transport projects. Over the last 40 years we have seen numerous empirical studies seeking to enrich our understanding of the amount that an individual or firm is willing to pay to save a unit of travel time (or more precisely transfer a fixed amount of time from one activity to another). With few exceptions, the majority of empirical studies have used essentially the same data metric and model estimation procedure. The most popular approaches have used either revealed preference (RP) or stated preference (SP) data and a multinomial logit (MNL) choice model to identify marginal rates of substitution between travel time and price of a trip. The few more advanced studies have integrated RP and SP data and have explored the gains in behavioural power of models that relax to varying degrees the underlying assumptions that produce the MNL model. This paper highlights the potential gains from a more carefully considered structure of the unobserved effects conditioning the form of a discrete choice model, and hence the possible mis-inference from the simpler MNL specification. We demonstrate the implication for VTTS of serial correlation between the SP treatments, covariance amongst alternatives, the presence of individual specific (random) effects or heterogeneity, and differential variance of the unobserved effects.