Catching the tail: Empirical identification of the distribution of the value of travel time

Recent methodological advances in discrete choice analysis in combination with certain stated choice experiments have allowed researchers to check empirically the identification of the distribution of latent variables such as the value of travel time (VTT). Lack of identification is likely to be common and the consequences are severe.

E.g., the Danish value of time study found the 15% right tail of the VTT distribution to be unidentified, making it impossible to estimate the mean VTT without resorting to strong assumptions with equally strong impact on the resulting estimate. This paper analyses data generated from a similar choice experiment undertaken in Sweden during 2007–2008 in which the range of tradeoff values between time and money was significantly increased relative to the Danish experiment.

The results show that this change allowed empirical identification of effectively the entire VTT distribution. In addition to informing the design of future choice experiments, the results are also of interest as a validity test of the stated choice methodology. Failure in identifying the right tail of the VTT would have made it difficult to maintain that respondents’ behaviour is consistent with utility maximisation in the sense intended by the experimenter.