A Dynamic Formulation for Car Ownership Modeling



A Dynamic Formulation for Car Ownership Modeling

Authors

C Cirillo, R Xu, University of Maryland, US

Description

Models for dynamic consumer behavior.

Abstract

Discrete choice models are commonly used in transportation planning and modeling, but their theoretical basis and their applications have been mainly developed in a static context. However, it is more and more recognized by researchers in various disciplines from economics to social sciences that choice situations take place in a dynamic environment and that strong interdependencies exist among decisions made at different points in time. In fact, individuals? plans and actions, as well as external conditions are subject to change (Ben-Akiva and Abou-Zeid, 2007).
We propose to develop an estimation technique for analyzing the impact of technological change on the dynamics of consumer demand. The proposed research presents a dynamic model of consumer demand that explicitly accounts for consumers? expectations of future product quality and consumers? outflow from the market, arising endogenously from their purchase decisions. The timing of consumers? purchases is formalized as an optimal stopping problem (Rust, 1987) where the agent must decide on the optimal time of purchase. This model frame will be further improved by modeling the choice from a set of differentiated products whose quality changes stochastically over time (Melnikov, 2000). The possibility to introduce persistence effects, through maintenance and upgrading of the current product, to the Melnikov-type optimal stopping problem will be also investigated. (Lorincz, 2005)
The framework will be developed in the context of car ownership. On that regards, long-term (number of cars and type to own or to purchase) and short-term (car usage) plans can change over time. First, people?s current plans are influenced by their experiences so that as their history changes, their plans could change as well. For example, the increased sensibility to environmental issues might lead one to abandon the idea of buying one more car in the future. Secondly, situational constraints or contextual changes might lead one to revise the actual situation. Sudden and large changes in level of taxation or fuel prices might induce individuals and household to change their initial plans or their present status. Thirdly, people might eventually adapt to new conditions in their environment or social context be so that they might mitigate inertia in the choice of their plans and actions. This is the case when market segments are willing to adopt new products with improved technologies (i.e. hybrid cars, bio-diesel).

Publisher

Association for European Transport