The goods/leisure tradeoff and disaggregate work trip mode choice models

In disaggregate work trip mode choice models, the wage of the worker often enters as an explanatory variable. In some models, the cost of travel is divided by the worker's wage, while in other models the travel times are multiplied by the wage. This paper analyzes the use of wage in mode choice models and shows how different assumptions about the worker's indifference mapping between goods and leisure lead to different methods of entering wage. Using a Cobb-Douglas utility function AG^1−βL^β, where G is goods and L is leisure, it is shown that when β = 0 time should be multiplied by wage in the mode choice model and when β = 1 cost should be divided by wage. For values of β between 0 and 1 a more general model obtains in which the value of β is a parameter subject to estimation. Preliminary evidence indicates that the value of β is between 0.7 and 1.0.