Using prospect theory to investigate the low marginal value of travel time for small time changes

Katrine Hjorth, Mogens Fosgerau

    Research output: Contribution to journalJournal articleResearchpeer-review

    Abstract

    A common finding in stated preference studies that measure the value of travel time (VTT) is that the measured VTT increases with the size of the time change considered, in conflict with standard neoclassical economic theory. We present a new test of a possible explanation for the phenomenon that builds on the diminishing or constant sensitivity of the value functions in prospect theory.We use stated preference data with trade-offs between travel time and money that provide separate identification of the degrees of diminishing sensitivity for time and money gains and losses. This enables us to test and potentially falsify the prospect theory explanation. We conclude that prospect theory remains a potential explanation of the phenomenon.
    Original languageEnglish
    JournalTransportation Research. Part B: Methodological
    Volume46
    Issue number8
    Pages (from-to)917-932
    ISSN0191-2615
    DOIs
    Publication statusPublished - 2012

    Keywords

    • Value of travel time
    • Stated preference data
    • Prospect theory
    • Small time savings

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