Valuation of Travel Time Variability in Scheduling versus Mean-Variance Models

Valuation of Travel Time Variability in Scheduling versus Mean-Variance Models

Jonas Eliasson
Joel Franklin

The standard method to estimate valuations of travel time variability for use in appraisal is to estimate the parameters of a reduced-form utility function, where some measure of travel time variability (such as the standard deviation) is included. A recently discovered problem with this approach is that the obtained valuation will in general depend on the standardized travel time distribution, and hence cannot be transferred from one context to another. Instead, we test another recently suggested approach: estimating a scheduling model and then deriving an implied reduced formexpression, which can be used for appraisal. The valuations implied by the scheduling model turn out to deviate substantially from a reduced-form model estimatedon the same sample. We conclude that the scheduling model – in the way it is usually interpreted and estimated – is not able to capture the entire disutility of travel time variability. Hence, although it can be shown that scheduling and reduced-form models are "theoretically equivalent", they are apparently not "empirically equivalent". We hypothesize that the derivation of reduced-form models from an underlying scheduling model omits two essential features: first, the notion of an exogenously fixed ―preferred arrival time neglects the fact that most activities can be rescheduled given full information about the travel times in advance, and second, disutility may be derived from uncertainty as such, in the form of anxiety, decisions costs or costs for having contingency plans. Finally, we report our best estimates of the valuation of travel time variability for public transit trips, for use in applied appraisal.

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