Stated choices and benefit estimates in the

context of traffic calming schemes:

utility maximization, regret minimization,
or both?
M. Boeria, R. Scarpaa, C.G. Chorusb
a. Gibson Institute for Land, Food and the Environment, Queens University Belfast
b. Faculty of Technology, Policy and Management, Delft University of Technology,
Delft, The Netherlands

Paper published in Transportation Research Part A 61 (2014) 121–135

Contact: m.boeri@qub.ac.uk

14th Envecon, Applied Environmental Economics Conference

Friday 14th March 2014, London

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Outline of the Presentation

• The approach
• Random Utility Model vs. Random Regret Model
• A Hybrid approach (LC model)
• Results RU vs. RR
• The case study
• Comparing the models (MNL and LC)
• Determinants of choice behaviour
• Welfare implications
• Conclusions and next steps

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
 How is the glass?

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
 How is the glass?

Regret Minimizers
This is not the only reason
to minimise regret
Regret is defined as
what one experiences
when a non-chosen
alternative performs
better than a chosen
one, on one or more
characteristics

Utility Maximizers
Utility is what the
respondent gets from
choosing an
alternative

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
The Random Utility Model
RUM advantages
• strong econometric foundations
• conceptual elegance
• formal tractability
BUT
• IIA assumption
=> fully compensatory decision rules

RRM advantages
• No IIA assumption in MNL
• Semi-compensatory decision rules
 Compromise effect
BUT
• More behaviourally than economically grounded – no WTP (yet).
• Results are not as straightforward in RRM to interpret as in RUM

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
The Random Regret Minimization Model

 Compromise effect (Chorus, C., Bierlaire, M., 2013 ):

Alternatives with an ‘in-between’ performance on all attributes,

relative to the other alternatives in the choice set, are generally
favoured by choice-makers over alternatives with a poor
performance on some attributes and a strong performance on
others.

Chorus, C., Bierlaire, M., 2013. An empirical comparison of travel choice models that
capture preferences for compromise alternatives. Transportation

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
The idea:

• Both RUM and RRM have strengths and

weaknesses
• Both RUM and RRM represent a choice paradigm,
but not the only one, as some choices are better
described by RUM and others by RRM

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
The idea:

• Both RUM and RRM have strengths and

weaknesses
• Both RUM and RRM represent a choice paradigm,
but not the only one, as some choices are better
described by RUM and others by RRM

• Applying both modelling approaches would capture

the behavioural influences on choices more
accurately than assuming in all instances RUM

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
 RESULTS

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
 The experiment

Study of preferences for traffic calming in Northern

England. The factors used in the experiment were:
1. Reduced noise level from road traffic (Noise);
2. Effective speed limit (Speed);
3. Reduced length of waiting time for pedestrians (Wait);
4. Appearance of the Traffic Calming scheme (Beauty);
5. Annual cost per household increased local taxation in the
form of council rates (Cost).

Sample: 407 usable interviews were carried out, generating

3256 responses for the choice experiments

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Comparing ratios in different modelling
approaches MNLs

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Comparing ratios in different modelling
approaches MNLs

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Determinants of choice paradigms

The baseline group is composed by respondents

who do not drive and can neither see nor hear
the road and have no school age Kids.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Determinants of choice paradigms

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Welfare implications

Assuming the scheme is to be voted in via a local

referendum poll, the quantity of interest is the
amount that at least 50% of the residents would
be willing to pay.

We need to predefine alternative traffic calming

schemes for welfare estimate in the RR context.

This because regret is a relative function of

choice set composition.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Welfare implications

For example in 3rd row - Traffic Calming Scheme 3a - all attributes

but Beauty are unchanged.
When scheme 3a is contrasted with schemes 1a; 2a and the
status quo,it is associated with a maximum majority value (50%
vote in favour) of about 3.2 pounds per respondent. At any higher
amount the scheme 3a would fall below majority support.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Conclusions and next steps

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
 Conclusions and next steps

• We estimate a behavioural latent class comparing two

choice paradigms (RRM and RUM).
• We explore the determinants of being best described by
RRM or RUM choice behaviour.
• We derive adequate welfare estimates for this context of
mixed choice behaviours.
• We associate familiarity with the choice context with
utility maximization.
• Respondents unfamliar with the choice context are likely
to adopt regret minimization.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Conclusions and next steps

Regret-minimization has been found to be particularly

important when:

a) choices are perceived as important (much can be “lost”

or “gained”) and difficult;
b) the decision-maker expects to receive feedback about
chosen and non-chosen options;
c) when choice sets are evaluated in terms of their
desirability (+ compromise).
(psychology literature Zeelenberg and Pieters, 2007).

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Conclusions and next steps

Several interesting next steps:

1. To which extent and how the two layers of information
from RRM and RUM can be used together to improve
policy appraisals
2. RRM needs to be tested in real money experiments
(work in progress)
3. Structural choice modelling for RR vs. RU
(work in progress)
4. Further empirical and relevant applications needed

Gibson Institute for Land, Food and Environment Institute for a Sustainable World
Thank you

Question?

Marco Boeri
Email: m.boeri@qub.ac.uk

Gibson Institute for Land, Food and Environment Institute for a Sustainable World