Heuristic Judgement, Prospect Theory and Stated Preference Surveys Aimed to Elicit the Value of Travel Time



Heuristic Judgement, Prospect Theory and Stated Preference Surveys Aimed to Elicit the Value of Travel Time

Authors

E J van de Kaa, TRAIL, NL

Description

This paper re-examines some stated preference surveys of travel time-cost tradeoffs, evaluates potential biases that might be caused by the experimental designs and shows that the outcomes are consistent with the premises of Prospect Theory.

Abstract

During the past decades Prospect Theory was developed. This behavioural-economic theory is largely based on findings from cognitive psychology. Heuristic judgment is presumed to play a crucial role in the valuation of attributes of choice options but may lead to biases when appropriate information is relatively inaccessible. Prospect theory in a broad, extended sense, including findings from the related heuristics-and-biases literature, might offer an improved understanding of the outcomes of stated preference surveys aimed at the valuation of travel time.

An extensive literature search covering the relevant social sciences yielded an overview of the premises of Prospect Theory. These were published elsewhere, together with their potential for application in travel behaviour research and a comparison with the principles of utility maximization (a/o Van de Kaa, 2004, Prospect Theory and the Understanding of Travellers Choice Behaviour, Procs. 8th TRAIL-congress, Rotterdam). This paper first summarizes the elements that seem most relevant to me for the interpretation of the choice behaviour of respondents in the experimental setting of a stated preference survey. Next, the experimental design and outcomes of a British and several Dutch stated preference surveys concerning travel time- travel cost tradeoffs are recapitulated. Starting from the premises of Prospect Theory (including heuristic judgment) several potential biases that might be caused by the experimental designs in connection with an analysis following the premises of utility maximization are evaluated. It is shown that the outcomes of the studies are consistent with the premises of Prospect Theory, which in particular implies loss aversive choice behaviour of at least most experimental subjects. The paper concludes with some examples of policy analyses where the application of Prospect Theory instead of utility maximization would make quite a difference in the recommendation of policy measures.

Publisher

Association for European Transport