The sensitivity of the valuation of travel time savings to the specification of unobserved effects

The behavioural value of travel time savings (VTTS) remains a controversial data item in the evaluation of transport projects. Over the last 40 years we have seen numerous empirical studies on the amount that an individual or firm is willing to pay to save a unit of travel time (or more precisely tr ansfer a fixed amount of time from one activity to another). With a few exc eptions, the majority of empirical studies have used essentially the same d ata metric and model estimation procedure. The most popular approaches have used either revealed preference (RP) or stated preference (SP) data and a multinomial logit (MNL) choice model to identify marginal rates of substitu tion between travel time and price of a trip. A few more advanced studies h ave integrated RP and SP data and have explored the gains in behavioural po wer of models that relax, to varying degrees, the underlying assumptions th at produce the MNL model. This paper highlights the potential gains from a more carefully considered structure of the unobserved effects which conditi on the form of a discrete choice model, and hence the possible misinference from the simpler MNL specification. We demonstrate the implication for VTT S estimates of serial correlation between the SP treatments, covariance amo ngst alternatives, presence of individual specific (random) effects or hete rogeneity, and differential variance of the unobserved effects. (C) 2001 El sevier Science Ltd. All rights reserved.