Evaluating Alternative Operations Strategies to Improve Travel Time ...

SHRP 2 L11: Final Appendices
Conceptual Considerations in Relying on Revealed or Stated
Preference Methods
There are numerous aspects of the RP/SP approach that make reliance on this method problematic
in practice. Some of the contrasts between the options and RP/SP approaches are the following:
1. The RP or SP approaches are not economical to apply, requiring costly studies for its
application. Putting aside any general skepticism about the reliability of SP procedures
in particular, even this method is a relatively costly to implement and subject to the
same statistical issues and biases that creep into interview-based contingent valuation,
conjoint and similar analyses.
2. The RP and SP approaches are not agnostic procedures free of functional form
assumptions akin to those of the options approach. In particular, they implicitly adopt
utility function specifications that are usually asserted, rather than demonstrated. The
function form is usually linear in its arguments (or some non-linear specification to
introduce risk-aversion). This is analogous, in a mathematical sense, to the fact that the
Black-Scholes approach employs assumptions about risk, too. In its simplest
expression, Black Scholes assumes risk-neutrality, but has been shown to be robust to
the assumption of risk-aversion.
3. The RP and SP analyses usually also postulate a fairly specific characterization of the
context of unreliability–e.g., that it arises out of a particular manifestation of a
scheduling-cost problem, etc. The options theoretic approach is no more restrictive; it
simply postulates that there is a willingness to pay for insurance (hypothetically) that
compensates drivers for not experiencing below-average speeds that are, in turn, drawn
from a log-normally distributed delay process.
4. A major difference is that the options theoretic approach allows separation of the valueof-time
issue from the "real" unreliability issue. Since the existing travel models carry
values of time internally for other purposes (mode choice and traffic assignment), the
RP and SP approaches (typically confounding time-time savings valuation and traffic
variability), are harder to integrate into the modeling suite. In contrast, the options
approach allows unreliability to be introduced directly into traditional, volume-delay
specifications used in travel model platforms. Since its primary empirical input is
speed-distributional information, it imposes light additional burdens on the modeler.
The required data on speed variations is plentiful, easily calculated from loop-detector
histories, and can be made idiosyncratic to individual network links. For the same
reason, the approach is friendlier in microsimulation model settings.
Numerical Comparison
A numerical comparison demonstrates that the options theoretic approach yields values of
unreliability similar to RP-derived estimates of Small, Winston and Yan (2005).
The additional complexity and cost of measuring and implementing RP/SP-derived measures
would be worthwhile, perhaps, if the simpler and less demanding options approach yielded vastly
different measures. In fact, however, the measures are virtually indistinguishable. This is
demonstrated below by comparing an options measure to that derived in Small, Winston and Yan
(2005) ("SWY"). This work is a highly regarded implementation of the RP/SP approach.
DETERMINING THE ECONOMIC BENEFITS OF IMPROVING TRAVEL-TIME RELIABILITY Page B-30