Value of Travel Time Savings under Random Taste Heterogeneity

Abstract

The purpose of this study was to assess the value of travel time savings (VTTS) of urban travelers in the setting of a city in a developing country. It contributes to the few empirical studies on calculations of the benefits of transportation facility development and evaluation. In practice, VTTS can be taken as an average value for the population. However, the wider socioeconomic disparities among travelers in cities in developing countries might suggest significant taste variations. The standard logit formulation fails to account for such random tastes. To capture the heterogeneity among individuals and the correlations between alternatives, this study explores the aptness and flexibility of the mixed logit formulation with revealed-preference data. By specifying a random travel time coefficient, it compares the total travel time savings by using different statistical distributions. Depending on the assumed statistical distribution of the travel time coefficient, the study reveals that significant increases in total travel time savings are achieved by the use of random coefficients logit compared with those achieved by the use of standard logit. The results indicate that by accounting for random taste variations among individuals, total VTTS increases by a minimum of 28% and a maximum of more than 80% compared with the values obtained by the fixed coefficients approach.