Modeling traveler choice behavior using the concepts of relative utility and relative interest

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Abstract

Individual choice behavior usually involves a complex decision-making process, and is often context-dependent reflecting the influence of choice environment and the fact that the individual has limited information processing ability and varying levels of interest in alternatives. However, the existing models in transportation have not represented these behavioral mechanisms satisfactorily, although to avoid the Independence of Irrelevant Alternatives (IIA) property of the widely used multinomial logit (MNL) model, a variety of non-IIA models have been suggested in the literature. This paper will propose another random utility choice model by introducing the concepts of relative utility and relative interest. A revised MNL model and a revised Nested-MNL model will be developed. Both of these models do not have the IIA property. The performance of these new models will be assessed using conjoint-based activity diary data about the choice of destination and stop pattern.

Introduction

During the last two decades, choice models have proven to be very powerful tools for policy analysis and evaluation in transportation research. The multinomial logit (MNL) model, characterized by the Independence of Irrelevant Alternatives (IIA) property, has become the most widely used choice model in transportation. Convincing examples have been put forward however to show that the IIA property is counterintuitive in many real choice situations. Thus, the development of non-IIA choice models has become a major methodological challenge in the study of individual choice behavior since the late 1970s in many disciplines. In transportation, the interest in developing the non-IIA models seems to have faded slightly as a result of the emerging field of activity-based models of travel demand, but recently a renewed interest is visible (e.g., see Wen and Koppelman, 2000).

On the other hand, individual choice behavior usually involves a complex decision-making process. Individuals utilize different heuristics that will keep the information processing demands within the bounds of their limited capacity (Payne, 1976). A wealth of literature in behavioral decision theory and psychology has shown that task complexity and choice environment affect individual choice behavior (Rushton, 1969; Swait and Adamowicz, 2001a). However, most of the existing models in transportation typically do not account for the effect of this kind of context dependence.

This paper therefore suggests an alternative random utility choice model based on the concepts of relative utility and relative interest. The concept of relative utility assumes that utility is meaningful only relative to some reference point(s). It acknowledges the fact that the individual choice behavior is context-dependent. The concept of relative interest stems from multiple-issue group decision-making theory (Coleman, 1973; Gupta, 1989), which argues that actors involved in negotiations are usually more interested in one issue than in another.

The remainder of this paper is organized as follows. First, to position the suggested choice model, Section 2 briefly reviews existing choice models with context dependence and other non-IIA choice models. Following that, Section 3 discusses the relative utility theorem, which provides the theoretic and behavioral basis for the new models. Section 4 then develops equivalents to the widely used MNL and NL models based on the concepts of relative utility and relative interest. These models were estimated in the context of the choice of destination and stop pattern. Section 5 describes the conjoint-based activity diary data for the model estimation as well as the estimation results. Finally, Section 6 concludes this study and discusses some future research.

Section snippets

Review of existing choice models

Traditional random utility maximization theory assumes that individuals choose the alternative with the highest utility, independent of context and learning etc. This is also true for most of the existing models in transportation. However, there is a wealth of literature in psychology and behavioral decision sciences, showing counter-evidence. Simonson and Tversky (1992) argued that context effects are both common and robust, representing the rule rather than the exception in choice behavior.

The concept of relative utility

The concept of relative utility has its roots in the research about income (Stadt et al., 1985). Duesenberry’s (1949) relative income hypothesis is probably the best-known example of a theory that rests on the concept of relative utility. Kapteyn (1977) developed a theory of preference formation, which assumed that utility was completely relative. Before continuing the discussion, it is necessary to define the concept of relative utility. We argue that an individual evaluates an alternative by

A new family of choice models based on the concepts of relative utility and relative interest

Although all of the three classes of non-IIA choice models, reviewed in Section 2, do not have the IIA property, each class of models has its own shortcomings and unresolved problems. Concerning the first class of non-IIA choice models, there is no way to know exactly what kind of specification will really reflect the real structure and/or distribution of error terms. One can only verify an assumed specification based on empirical analysis. Most importantly however, this class of models has no

Data

To examine the effectiveness of the r-MNL and r-NL models, a conjoint-based activity data set (Wang et al., 2000), collected in the Netherlands in 1997 for analyzing the choice of destination and stop pattern, was used. In the experiment, the respondents had to decide where, when, in what sequence and according to what types of home-based tours the activities would be conducted. The attributes assumed to influence the choices of destination and stop pattern are listed in Table 1, Table 2. Two

Conclusions and future research

The MNL and NL models have dominated in transportation for about 20 years. To avoid the IIA property of the MNL model and interdependence among alternatives in the same nest in the NL model, developing non-IIA choice models is still a major methodological challenge in the study of choice behavior. On the other hand, it has not been satisfactorily examined how to tackle the complex choice decision-making process from the perspective of context dependence.

This paper argues and illustrates that

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