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CE 300 – Thesis 10 November 2017

Progress Report Transportation Engineering Group

Valuation of Travel Time Using Stated-Preference Data:

A Disaggregate Approach
Graduate Student, M.S. in Civil Engineering Program
Institute of Civil Engineering, University of the Philippines Diliman

Professor, Institute of Civil Engineering, University of the Philippines Diliman

1. INTRODUCTION through discrete choice analysis (also known as

discrete choice modeling) is the most widely used
1.1 Background of the Study method to estimate the value of travel time. The
The savings from travel time cost, as researches have analysis relies on the framework of random utility
shown, are taking the bulk of the benefits that can be model which states that an individual chooses an
derived when a new transport facility is introduced alternative that gives him or her the highest utility
(Chandran, P, K, & M V L R, 2016; Tseng & Verhoef, (Ben-Akiva & Bierlaire, 1999). The random utility
2008; Gunn, Tuinenga, Cheung, & Kleinjn, 1999). model hopes to factor in the attributes of the available
Given the weightiness of this monetary worth, it is just alternatives, and the characteristics of the individual
a crucial element to determine a more accurate unit tripmakers significantly proven to be essential in
value of travel time. choosing an alternative. Attributes of the alternatives
usually include measures of service such as travel
In the Philippines, past transport development studies time, frequency, reliability of service, etc. and travel
that touched on travel time costs seemed to derive its cost, while socioeconomic variables such as age,
savings from assumed values of travel time. Metro gender, income may be included for the characteristics
Manila Urban Transportation Integration Study of the individual tripmakers. The interaction between
(MMUTIS) in 1999, for instance, used values of PHP these variables paves the way to formulating the mode
60.0/hour for public modes and PHP 74.4/hour for choice behavior of the individual.
private modes for the year 1996. This further noted that
increases by 1.36 and 1.66 of its aforementioned value After the development of mode choice models,
in the years 2005 and 2015, respectively, would be derivation of marginal effects to evaluate the trade-offs
foreseen (JICA, 1999). Meanwhile, a more recent between cost and time would be employed. The
study called Roadmap for Infrastructure Development marginal rate between travel cost and travel time is the
for Metro Manila and its Surrounding Areas (Region value of travel time. It is said to be the representation
III & Region IV-A) (also known as JICA Dream Plan), in monetary unit the changes produced in traveler’s
completed in 2014, mentioned values of PHP utility as a consequence of changes in the transport
111.8/hour for car, and PHP 78.1/hour for jeepney and system that entails changes in travel time (Roman, et
bus passengers for year 2012 (JICA and NEDA, 2014). al., 2014).
All of these values were presented in these studies but
its theoretical bases were not directly stated. It is for As this paper has arisen from a great need to valuate
this event why the proponent of this research has travel time in the Philippines, particularly in Metro
chosen to quantify the value of travel time. Manila, how individual tripmakers choose their mode
of transportation would be analyzed. A disaggregate
In most studies, Value of Time (VOT), also known as modeling approach would be carried out by looking at
willingness-to-pay (WTP), is defined as the monetary the utility that can be derived by individuals from each
value people are willing to pay to diminish travel time purposely-selected alternative through discrete choice
(Roman, et al., 2014). Not only is the monetary value analysis. Once the discrete choice models have been
of travel time useful for cost-benefit analysis in project developed, the marginal effects would be evaluated to
evaluation, but it is also proven to be a requisite for know the monetary value individual tripmakers are
modeling and forecasting processes (Mackie, Jara- willing to pay to save on travel time – thus estimating
Diaz, & Fowkes, 2001). the value of travel time.

A disaggregate approach that aims to model the travel 1.2 Statement of the Problem
behavior of individuals (sometimes referred to in this The value of travel time is a much needed monetary
study as ‘individual tripmakers,’ or ‘decision-makers’) worth for cost-benefit analysis in project evaluation.

Past transport development plans completed for changes to meet individuals’ satisfaction to transport
Philippines’ capital, Metro Manila, such as the JICA alternatives. Lastly, disaggregate approach is known to
Dream Plan in 2014, and MMUTIS in 1999, had produce unbiased parameter estimates unlike in
seemed to use assumed figures of values of travel time aggregate approach, and is more efficient in model
to compute for travel time cost savings. This appears reliability at a given unit cost of data collection.
to be a curious case as there has been a wide array of
literature pertaining to valuation of travel time. In this In this research, a disaggregate modeling approach in
study, the question “how much money will the mode choice analysis would be carried out by way of
individual tripmakers of Metro Manila be willing to discrete choice modeling. An in-depth understanding
pay to save on travel time?” is tried to be answered. of discrete choice modeling is necessary as quantifying
the value of travel time involves estimating the mode
1.3 Objectives choice models first, and evaluating the marginal rates
This research aims to estimate the value of travel time of substitution between cost and travel time from the
in Metro Manila. Upon the completion of this study, models generated (Small, Noland, Chu, & Lewis,
the following specific deliverables are expected to be 1999).
The goal of discrete choice modeling in the context of
a) Establishment of a purposely-designed this study is to predict the decision-making behavior of
stated-preference questionnaire to be used for trip makers in choosing their mode of transportation.
the survey. This is done by determining the relative influence of
b) Development of discrete choice models different attributes of alternatives and characteristics
applicable for the selected alternatives. of decision makers at the time individuals make
c) Valuation of travel time in Metro Manila for decisions (Koppelman & Bhat, 2006). The method
the selected alternatives. hypothesizes based on utility theory that follows the
“utility maximization rule.” This rule states that every
1.4 Significance of the Study alternative has utility, and the decision-maker chooses
Once this study has been completed, the results may the one with the highest utility (Ben-Akiva & Bierlaire,
be used for a more accurate value of travel time cost 1999).
savings in transport systems evaluation. Optimal
pricing of transport system operations and design of Horowitz, Koppelman, & Lerman (1986) developed a
other policymaking efforts may also be drawn from the representation of this utility maximization rule, given
outcome of this research. that C denotes the choice set that includes the
alternatives available for the individual. For each
alternative i in C, let Xi be the attributes of i for the
2. REVIEW OF RELATED LITERATURE individual; and S as the attributes of the individual that
This study owes its idea from the vast extent of are relevant to the preferences in C. According to the
literature pertaining to valuation of travel time. The utility maximization rule, there is a utility function U
essential concepts that need reviews, as deemed that represents the attributes of the alternatives and
necessary by the proponent of this study, are discrete individuals and that, the individual prefers alternative
choice modeling in disaggregate approach, survey i to alternative j if U(Xi, S)>U(Xj, S).
methodologies in mode choice analysis, and valuation
of travel time itself. The discussions are arranged in Choosing the alternative with the highest utility has not
the order as mentioned. always been the case. Research suggests that even two
individuals with the same characteristics, when faced
2.1 Discrete Choice Modeling in Disaggregate with the same alternative, choose different options.
Approach This decision-making process is not easily captured in
Aggregate and disaggregate are two approaches the utility models developed by analysts, and thus an
employed in forecasting problems. The former deals error is hereby added to account for the unobservable
with grouping the population that makes up the zones variables. This brings in two components for the true
as units of analysis, while the latter concerns with the utility given by (Koppelman & Bhat, 2006):
individual as the sole maker of trip which is considered
the unit of analysis (Balce, 1988). 𝑈𝑖𝑡 = 𝑉𝑖𝑡 + 𝜀𝑖𝑡 (1)

Koppelman & Bhat (2006) stated some of the where Uit is the true utility of the alternative i to the
advantages of having disaggregate approach over decision-maker t, Vit is the deterministic or observable
aggregate approach. Being able to capture the portion of the utility estimated by the analyst, and εit is
individuality in terms of decision-making power is one the error or the portion of the utility unknown to the
aspect why it is more favorable to use. As it is also analyst.
having causal in nature, it is easier to transfer
parameters through space and time, which is a critical Acknowledgment of the error component is essential,
requirement for prediction. In addition, since the but the analysis of utility is only focused on the
behavior of the individuals is being understood, the observable component. Koppelman and Bhat (2006)
attributes of modes can be then altered to plan out mentioned three (3) portions of the deterministic

component: utility associated with characteristics of the number of attribute levels, specification of values
the individual, utility of alternative associated with its for attribute levels and statistical design, and setting up
attributes, and the interaction between the two. the scenarios in the questionnaire as the steps to
Mathematically, it is in additive in form as shown undertake before the survey proper.
below to simplify the estimation process.
Meanwhile, Roman, et al. (2014) mentioned that prior
𝑉𝑖𝑡 = 𝑉(𝑆𝑡 ) + 𝑉(𝑋𝑖 ) + 𝑉(𝑆𝑡 , 𝑋𝑖 ) (2) to conducting their analysis, tripmakers’ perception of
the different modes between two sites being
where V(St) is the utility associated with characteristics considered, and identifying the factors that affect mode
of the individual t, V(Xi) is the utility of alternative i choice, were the initial activities employed. These
associated with its attributes, and V(St, Xi) is the activities secured them ideas on what were the factors
interaction between the attributes of alternative i and involved in the choosing of mode decided upon by
the characteristics of individual t. Income, age, and sex individual tripmakers. A questionnaire that asked
of the individual, as well as the number of automobiles, information about the trip such as origin, destination,
number of workers, number of adults of the access and egress times, waiting time, in-vehicle times,
individual’s household are some of the variables among others, and the respondent’s household and
commonly used in the characteristics of the individual socioeconomic data was drafted. Personal interview
tripmakers. Attributes of the alternatives are described type of suvey was conducted with the aid of a paper
by factors such as total travel time, in-vehicle travel and pencil questionnaire completed by the interviewer.
time, out-of-vehicle travel time, travel cost, number of The formula used to obtain the number of samples n in
transfers, walk distance, and reliability of on time their study was from Smith (1979):
arrival. Lastly, the interaction-related variables can be
travel cost divided by household income, travel time 𝐶𝑉 2 𝑍𝛼
𝑛= (3)
or cost interacted with sex or age group of traveler, and 𝐸2
out-of-vehicle time divided by total trip distance.
where CV is the coefficient of variation of the variable,
2.2 Survey Methodologies in Mode Choice Analysis Zα is the normal distribution value for a confidence
Stated-preference (SP) and revealed-preference (RP) level α (90%), and E is the accuracy level expressed as
surveys are the available schemes on data collection a proportion. The value of CV for the mode with the
involved in valuation of travel time studies. RP lowest market share was used to have sufficient
surveys require actual input of data that would be the representation from all modes.
result of individuals’ experiences upon traveling. Data
collection may be in the form of travel survey, diaries, Hensher & Louviere (1999) designed its survey in such
and field experiments. SP surveys, on the other hand, a way that four (4) alternatives may be joint for each
deal with the collection of data from individuals’ travel choice scenario. The alternatives were car (no toll), car
behavior based on hypothetical scenarios. These types (toll), bus or busway, and train or light rail. The
of data may be derived through SP surveys and questionnaire targetted people going to work as
simulators (Antoniou, Matsoukis, & Roussi, 2007). respondents of the survey. Public transport alternatives
were described by total in-vehicle time, frequency of
Literatures lean toward stated-preference as the more service, closest stop to home, closest stop to
preferred type of survey, since it collects multiple data destination, and fare. On the other hand, car
from one person (Sasaki, Morikawa, & Kawakami, alternatives had travel times, fuel costs, parking costs,
1999). This reasoning is in corollary to the rationale and travel time variability while for car with toll,
why discrete choice models are used – that is, to attributes such as departure times, and toll charges
understand individual travel choices, and the taste were added.
heterogeneity among individuals. Unlike in revealed-
preference, the respondent himself or herself specifies 2.3 Valuation of Travel Time
the data. Value of time is estimated by getting the marginal
effects between time and cost from the utility function.
Whichever type of survey would be used, preparing
the survey questionnaire is as important so as to Koppelman & Bhat (2006) mentioned several forms of
understand the way individuals choose alternatives. value of time function based on the general
This is an important task employed before the survey formulation equal to ratio between the derivative of
proper to correctly design a questionnaire that would utility with respect to time and derivative with respect
give the needed information on the characteristics of to cost. The general formulation is shown below.
the individual tripmakers and the attributes of the 𝜕𝑉⁄
mode alternatives. 𝜕𝑇𝑇
𝑉𝑂𝑇 = 𝜕𝑉⁄ (4)
The steps on how to design an SP survey were
specified on the Manual written by Wattam, Flanary, where VOT is the value of time, V is the deterministic
Ahmed, & Wardman (2005). The book mentioned component of utility, TT is travel time and TC is travel
identification of the set of attributes, selection of the cost.
measurement unit for each attribute, specification of

When the utility function is specified to be linear and Heteroscedastic Extreme Value SP-RP
is only considering the travel time and travel cost as Discrete Choice Models. World Transport
the explanatory variables, the resulting form of VOT Research: Proceedings of the 8th World
function is: Conference on Transport Research (pp. 1-
13). Elsevier Science Ltd.
𝛽𝑇𝑇 Horowitz, J. L., Koppelman, F. S., & Lerman, S. R.
𝑉𝑂𝑇 = (5)
𝛽𝑇𝐶 (1986). A Self-Instructing Course in
Disaggregate Mode Choice Modeling.
When cost is interacted with another variable such as JICA (Japan International Cooperation Agency).
income, on the basis of saying that, at a unit of cost, it (1999). Metro Manila Urban Transportation
is proportionally less important with increasing Integration Study: Final Report.
income, in this case, the resulting VOT function would JICA and NEDA (Japan International Cooperation
be: Agency and National Economic
Development Authority). (2014). Roadmap
𝑉𝑂𝑇 = 𝛽𝑇𝐶𝐼𝑛𝑐⁄ (6) for Transport Infrastructure Development
𝐼𝑛𝑐𝑜𝑚𝑒 for Metro Manila and its Surrounding Area
(Region III & Region IV-A).
Koppelman, F. S., & Bhat, C. (2006). A Self
Instructing Course in Mode Choice
𝑉𝑂𝑇 = 𝛽𝑇𝐶𝐼𝑛𝑐 (7) Modeling: Multinomial and Nested Logit
Mackie, P., Jara-Diaz, S., & Fowkes, A. (2001). The
Lastly, if the case wants to evaluate the VOT when value of travel time savings in evaluation.
time is in the natural log transformation to denote that Transportation Research Part E: Logistics
utility effect of increasing time decreases with time, and Transportation Review, 37(2-3), 91-106.
the resulting function is: doi:
𝑉𝑂𝑇 = (8) Roman, C., Martin, J., Espino, R., Cherchi, E.,
Ortuzar, J., Rizzi, L., . . . Amador, F. (2014).
Most VOT studies categorize the derived figures by Valuation of travel time savings for intercity
relating income by mode, income by trip purpose, and travel: The Madrid-Barcelona corridor.
mode vs trip purpose (Gunn, et al., 1999). Transport Policy(36), 105-117.
Sasaki, K., Morikawa, T., & Kawakami, S. (1999). A
Discrete Choice Model with Taste
Heterogeneity Using SP, RP and Attribute
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