Does scale heterogeneity across individuals matter? An empirical assessment of alternative logit models

There is growing interest in establishing a mechanism to account for scale heterogeneity across individuals (essentially the variance of a variance term or the standard deviation of utility over different choice situations), in addition to the more commonly identified taste heterogeneity in mixed logit models. A number of authors have recently proposed a model that recognizes the relationship between scale and taste heterogeneity, and investigated the behavioural implications of accounting for scale heterogeneity in contrast to a term in the utility function, itself. In this paper we present a general model that extends the mixed logit model to explicitly account for scale heterogeneity in the presence of preference heterogeneity, and compare it with models that assume only scale heterogeneity (referred to as the scale heterogeneous multinomial logit model) and only preference heterogeneity. Our empirical assessment suggests that accommodating scale heterogeneity in the absence of accounting for preference heterogeneity may be of limited empirical interest, resulting in a statistically inferior model, despite it being an improvement over the standard MNL model. Scale heterogeneity in the presence of preference heterogeneity does garner favour, with the generalized mixed logit model an improvement over the standard mixed logit model. The evidence herein suggests, however, that compared to a failure to account for preference heterogeneity that is consequential, failure to account for scale heterogeneity may not be of such great empirical consequence in respect of behavioural outputs such as direct elasticities and willingness to pay. However additional studies are required to establish the extent to which this evidence is transferable to a body of studies.     

The Signs of the Times: Imposing a Globally Signed Condition on Willingness to Pay Distributions

A feature of recent developments in choice models that enable estimation of the distribution of willingness to pay (WTP) is that the sign of the distribution can change over the range. Behaviourally this often makes little sense for attributes such as travel time on non-discretionary travel, despite a growing recognition of positive utility over some travel time ranges. This can in part be attributed to the analytical distribution that is selected (except the cumbersome lognormal), many of which are unconstrained over the full range. Although a number of analysts have imposed constraints on various distributions for random parameters that can satisfy the single-sign condition, these restrictions are, with rare exception, only satisfied for the mean and the standard deviation estimates of a random parameter. When heterogeneity around the mean and/or heteroscedasticity around the standard deviation is allowed for, however, the constraint condition is often not satisfied. Given the popularity of distributions other than the lognormal, in order to satisfy the sign condition under the most general form of parameterisation, we need to impose a global sign condition. In this paper we show how this might be achieved in the context of the valuation of travel time savings for car commuters choosing amongst an offered set of route-specific travel times and costs. We illustrate the impact of the constraint under a globally constrained Rayleigh distribution for total travel time parameterisation, contrasting the evidence with a multinomial logit model and a range of other distributional assumptions within the mixed logit framework. Discussions with Bill Greene, John Rose, Ken Train and especially Juan de Dios Ortuzar have been invaluable as have the comments of referees.     

Do public transport investments promote urban economic development? Evidence from bus rapid transit in Bogotá, Colombia

In 2000, the city of Bogotá, Colombia embarked on a grand land use and transportation system experiment. The transformation of Bogotá included building the TransMilenio Bus Rapid Transit (BRT) system, a city-wide system that offers speed and convenience similar to that of an underground metro. TransMilenio is widely regarded as a success, and cities around the world are planning or building similar systems. In this paper, we use a repeated cross-section labor market dataset to assess whether access to the new BRT system affects the incomes of those who live in station area neighborhoods. Our results indicate that the opening of the TransMilenio system was associated with increased income for those living near—but not immediately adjacent to—trunk line stations. This relationship is strongest in the lower and middle-income range. There are at least two possible explanations for this result: 1. existing residents earn higher wages, or 2. higher income workers move to the neighborhood. Our data do not allow us to distinguish clearly between them, but available evidence suggests that much of the effect is likely due to relocation. Our results stand in contrast to prior work, which has largely suggested that improvements in public transit will tend to reduce wages in station areas.