A MODIFIED MULTINOMIAL LOGIT MODEL OF ROUTE CHOICE FOR DRIVERS USING THE TRANSPORTATION INFORMATION SYSTEM

Similar documents
Discrete Choice Theory and Travel Demand Modelling

Discrete Choice Model for Public Transport Development in Kuala Lumpur

Choice Probabilities. Logit Choice Probabilities Derivation. Choice Probabilities. Basic Econometrics in Transportation.

FIT OR HIT IN CHOICE MODELS

The Multinomial Logit Model Revisited: A Semiparametric Approach in Discrete Choice Analysis

Interpretation issues in heteroscedastic conditional logit models

Logit with multiple alternatives

1. You are given the following information about a stationary AR(2) model:

A potentially useful approach to model nonlinearities in time series is to assume different behavior (structural break) in different subsamples

High-Frequency Data Analysis and Market Microstructure [Tsay (2005), chapter 5]

Comparison of Complete Combinatorial and Likelihood Ratio Tests: Empirical Findings from Residential Choice Experiments

Is there a Stick Bonus? A Stated Choice Model for P&R Patronage incorporating Cross-Effects

School of Economic Sciences

Estimating Market Power in Differentiated Product Markets

Hierarchical Generalized Linear Models. Measurement Incorporated Hierarchical Linear Models Workshop

Evaluation of influential factors in the choice of micro-generation solar devices

Estimating Mixed Logit Models with Large Choice Sets. Roger H. von Haefen, NC State & NBER Adam Domanski, NOAA July 2013

3 Logit. 3.1 Choice Probabilities

The Usefulness of Bayesian Optimal Designs for Discrete Choice Experiments

Econometrics II Multinomial Choice Models

Economics Multinomial Choice Models

Some Simple Stochastic Models for Analyzing Investment Guarantees p. 1/36

Economics, Complexity and Agent Based Models

CSCI 1951-G Optimization Methods in Finance Part 00: Course Logistics Introduction to Finance Optimization Problems

Financial Risk Management

Discrete Choice Modeling of Combined Mode and Departure Time

The Vasicek Distribution

INTERNATIONAL REAL ESTATE REVIEW 2002 Vol. 5 No. 1: pp Housing Demand with Random Group Effects

What is spatial transferability?

Mixed Logit or Random Parameter Logit Model

Contract Pricing and Market Efficiency: Can Peer-to-Peer Internet Credit Markets Improve Allocative Efficiency?

Analysis of implicit choice set generation using the Constrained Multinomial Logit model

Sharpe Ratio over investment Horizon

Question 1 Consider an economy populated by a continuum of measure one of consumers whose preferences are defined by the utility function:

State Dependence in a Multinominal-State Labor Force Participation of Married Women in Japan 1

to level-of-service factors, state dependence of the stated choices on the revealed choice, and

arxiv: v1 [q-fin.rm] 13 Dec 2016

Choice Models. Session 1. K. Sudhir Yale School of Management. Spring

A UNIFIED MIXED LOGIT FRAMEWORK FOR MODELING REVEALED AND STATED PREFERENCES: FORMULATION AND APPLICATION TO CONGESTION

Chapter 3. Dynamic discrete games and auctions: an introduction

1 Excess burden of taxation

INDIAN INSTITUTE OF SCIENCE STOCHASTIC HYDROLOGY. Lecture -5 Course Instructor : Prof. P. P. MUJUMDAR Department of Civil Engg., IISc.

The Stochastic Approach for Estimating Technical Efficiency: The Case of the Greek Public Power Corporation ( )

Drawbacks of MNL. MNL may not work well in either of the following cases due to its IIA property:

Chapter 6. Transformation of Variables

Econ 8602, Fall 2017 Homework 2

Bivariate Birnbaum-Saunders Distribution

Using Halton Sequences. in Random Parameters Logit Models

Multinomial Choice (Basic Models)

On modelling of electricity spot price

Budget Setting Strategies for the Company s Divisions

Chapter 6 Forecasting Volatility using Stochastic Volatility Model

Heterogeneity in Multinomial Choice Models, with an Application to a Study of Employment Dynamics

Chapter 8: CAPM. 1. Single Index Model. 2. Adding a Riskless Asset. 3. The Capital Market Line 4. CAPM. 5. The One-Fund Theorem

Two hours. To be supplied by the Examinations Office: Mathematical Formula Tables and Statistical Tables THE UNIVERSITY OF MANCHESTER

Chapter 5 Univariate time-series analysis. () Chapter 5 Univariate time-series analysis 1 / 29

Nested logit. Michel Bierlaire

Lecture 1: Logit. Quantitative Methods for Economic Analysis. Seyed Ali Madani Zadeh and Hosein Joshaghani. Sharif University of Technology

LECTURE NOTES 10 ARIEL M. VIALE

Course information FN3142 Quantitative finance

Willingness to pay for accommodating job attributes when returning to work after cancer treatment:

Random Variables and Probability Distributions

Nested logit. Michel Bierlaire

A novel algorithm for uncertain portfolio selection

Universal Properties of Financial Markets as a Consequence of Traders Behavior: an Analytical Solution

Journal of Computational and Applied Mathematics. The mean-absolute deviation portfolio selection problem with interval-valued returns

Designing Price Contracts for Boundedly Rational Customers: Does the Number of Block Matter?

Modeling. joint work with Jed Frees, U of Wisconsin - Madison. Travelers PASG (Predictive Analytics Study Group) Seminar Tuesday, 12 April 2016

Incorporating Observed and Unobserved Heterogeneity. in Urban Work Travel Mode Choice Modeling. Chandra R. Bhat. Department of Civil Engineering

Analysis of extreme values with random location Abstract Keywords: 1. Introduction and Model

MEASURING PORTFOLIO RISKS USING CONDITIONAL COPULA-AR-GARCH MODEL

Lecture 9: Markov and Regime

Log-linear Modeling Under Generalized Inverse Sampling Scheme

Analysis of the Impact of Interest Rates on Automobile Demand

A Stochastic Reserving Today (Beyond Bootstrap)

Consistent estimators for multilevel generalised linear models using an iterated bootstrap

Financial Time Series and Their Characterictics

INSTITUTE OF ACTUARIES OF INDIA EXAMINATIONS. 20 th May Subject CT3 Probability & Mathematical Statistics

Chapter 3 Common Families of Distributions. Definition 3.4.1: A family of pmfs or pdfs is called exponential family if it can be expressed as

Markowitz portfolio theory

PERMUTATION AND COMBINATIONS APPROACH TO PROGRAM EVALUATION AND REVIEW TECHNIQUE

Stat 6863-Handout 1 Economics of Insurance and Risk June 2008, Maurice A. Geraghty

SOCIETY OF ACTUARIES EXAM STAM SHORT-TERM ACTUARIAL MATHEMATICS EXAM STAM SAMPLE QUESTIONS

Labor Economics Field Exam Spring 2011

A Convenient Way of Generating Normal Random Variables Using Generalized Exponential Distribution

Model Estimation. Liuren Wu. Fall, Zicklin School of Business, Baruch College. Liuren Wu Model Estimation Option Pricing, Fall, / 16

Top Incorrect Problems

Firm Heterogeneity and Credit Risk Diversification

THE IMPACT OF BANKING RISKS ON THE CAPITAL OF COMMERCIAL BANKS IN LIBYA

Loss Simulation Model Testing and Enhancement

Financial Risk Forecasting Chapter 9 Extreme Value Theory

A Macro-Finance Model of the Term Structure: the Case for a Quadratic Yield Model

Dynamic Replication of Non-Maturing Assets and Liabilities

Career Progression and Formal versus on the Job Training

WORKING PAPER ITLS-WP Does the choice model method and/or the data matter? INSTITUTE of TRANSPORT and LOGISTICS STUDIES

Log-Robust Portfolio Management

Monte Carlo and Empirical Methods for Stochastic Inference (MASM11/FMSN50)

Lecture 8: Markov and Regime

Modelling the Term Structure of Hong Kong Inter-Bank Offered Rates (HIBOR)

Automobile Ownership Model

Transcription:

A MODIFIED MULTINOMIAL LOGIT MODEL OF ROUTE CHOICE FOR DRIVERS USING THE TRANSPORTATION INFORMATION SYSTEM Hing-Po Lo and Wendy S P Lam Department of Management Sciences City University of Hong ong EXTENDED ABSTRACT Due to the rapid advancements of computing, telecommunication and control technologies, the use of Transportation Information System (TIS) has become very popular. Under such system, the public would be able to obtain traffic and transport information in real time through private or public service providers via various means such as variable message signs, Internet, and mobile phones, etc. The amount of traffic information available to road users will definitely be much more than what we are experiencing now. However, while some of these services are free, many come with a price. As a result, the amounts of traffic information received by drivers on the road would vary a lot, depending on how much the drivers are willing to pay for the traffic information. How drivers with different degrees of uncertainty about traffic conditions make their route choice is an important and interesting issue. One immediate casualty of the popular use of the TIS is the multinomial logit model in the study of route choice of drivers. Up till now, the standard use of the multinomial logit model assumes that the degrees of knowledge of drivers about traffic conditions are similar and uniform across the whole population. This is because there is no parameter contained in the standard multinomial logit model that accounts for the knowledge of traffic conditions. If drivers on the road are with different degree of information about traffic conditions when the TIS is widely used, the assumption of a homogeneous population can no longer be valid and it is not appropriate to use a single multinomial logit model for all the drivers. This is because under such heterogeneous population, the degree of uncertainty about the traffic conditions among drivers varies and their choice data cannot be combined directly (Louviere et al. 2000). One approach that has been suggested to solve this problem is to use different multinomial logit models for multi-class drivers. However, this approach requires two assumptions to be satisfied: (i) drivers can be explicitly grouped into specific classes such as the class of private car drivers and the class of truck drivers etc. (ii) the classes are independent of each other so that separate estimates of parameters of the logit models are produced for each class. Both of these two assumptions may not be satisfied for drivers under the TIS. This paper proposes to develop an alternative approach to tackle the problem by modifying the multinomial logit model. One popular version for the development of the multinomial logit model is the use of a random utility function and the Gumbel distribution. The random utility function is represented as the sum of two components: A deterministic components, V, that depends on observable attributes

of alternatives and characteristics of individuals, and a random component, ε, that represents the effects of stochastic behavior of individuals and unobservable attributes and characteristics. The random utility function for individual i and alternative j can be written as: U ij = V ij (y i, w j ) + ε ij (1) where y i denotes the observed characteristics of individuals i and w j denotes the observed attributes of alternative j. Statistically, the models considered here assume that the deterministic component, V ij, is a linear function of the attributes of alternative, w j, and the individual s attributes, y i. More precisely, we can write V ij (y i, w j ) = β X ij, where X ij = (x ij1, x ij2,, x ijk ) is a vector of characteristics of individual i and attributes of alternative j, and β is the vector of coefficients. This X-vector might include simple attributes (e.g. income, price per trip, etc), transformation of attributes (e.g. the log of income or price), or explicit interactions of the attributes of the alternatives and the individuals (e.g. price/ income). The coefficient vector β reflects the tastes of individuals in the population. The random component is included in the utility function because there are fluctuations inherent in the process of evaluating alternatives. The choice is the outcome of a probabilistic process. The randomness of the utility function can be attributed to two sources. The stochastic behaviour of the decision maker and the inability of the modeller to formulate individual behaviour precisely (Lam and Lo, 1997). Lack of information about the road network also leads to the use of random utility functions. As Manski 1977 put it, Such rules are introduced not to reflect a lack of rationality in the decision-maker but to reflect a lack of information regarding the characteristics of alternatives and/ or decision makers on the part of the observer. The random components of the utilities of the different alternatives are assumed to be independent and identically distributed (IID) with a Gumbel (a type I extreme value) distribution. The Gumbel distribution has the distribution function, F(ε), and probability density function, f(ε) as follows: F(ε) = exp[ e µ (ε η) ] and (2) f (ε) = µe µ (ε η) exp[ e µ (ε η) ], µ > 0, - < ε < (3) Without loss of generality, set η=0 and the following multinomial logit model can be obtained: P[alternative 1 is chosen] = e µv 1 e µv 1 + e µv 2 +... + e µv J Note that equation (4) is a modification of the traditional logit model used in practice in that there is a factor µ in front of the utility function of each alternative. Equation (4) cannot be used (4)

directly in discrete choice modelling as the parameter µ of the Gumbel distribution is now confounded with each coefficient of the utility function: µv j = µ(β X) = µβ 0 + µβ 1 + µβ 2 + + µβ k. (5) The convention in practice is to assume µ = 1 for all alternatives and for all individuals. This assumption may be correct when the population is homogeneous and that the degrees of drivers knowledge of traffic conditions are of similar level. When the TIS becomes more popular and widely used, this assumption may be questionable. This is due to the fact that µ is related to the degree of knowledge of traffic conditions of a driver. The parameter µ should not be the same and set to 1 but should be different for different drivers. We therefore propose to treat the parameter µ as a random variable and propose to use equation (4) as the modified version of the multinomial logit model of route choice for drivers using TIS. Consider a discrete choice situation where drivers i = 1, 2,, I choose one route among j = 1, 2,, J available ones on occasion t = 1, 2,, T. The following logit formulation can be used for studying individual route choice behaviour where; P it ( j) = exp{µ i (β 0 j + β k x ijkt N l =1 k =1 exp{µ i (β 0l + β k x ilkt k =1 P it (j) = the probability that the ith driver choose route j on the tth occasion (i = 1, 2,, I; j = 1, 2,, J; and t = 1, 2,, T). X ijkt = the value of the kth factor for route j faced by driver i on the tth occasion. β 0j = the intercept term representing the intrinsic preference for route j. β k = the response coefficient for the kth factor (k = 1, 2,, ). µ i = the scale parameter for driver i for the Gumbel distribution. It is clear from the formulation in (6) that the parameter µ i is individual specific. If there are many observations for each driver, then it is possible to consistently estimate these parameters. In most data sets, there will not be an adequate number of observations for every individual to accomplish this task. Hence estimating the individual-specific parameter µ is generally not feasible. One solution to the problem is to use a random-µ specification, in which the micro-level parameter µ is assumed to be randomly distributed across individuals with a probability distribution G(µ). For a particular individual i, the parameter µ i is assumed to be a realisation from G(µ). Conditional on the value of µ, the probability of a randomly drawn driver choosing route j on occasion t will be given by (6)

Pt( j µ) = 8 exp{µ(β 0 j + β k x ijkt J =1 k=1 J exp{µ(β oj + β k x ilkt =1 (7) For any randomly drawn individual, the unconditional probability of choosing alternative j on occasion t will be: Pt( j) = Pt( j µ)dg(µ) (8) µ To estimate the model parameters, one can assume a specific parametric form for G(µ) and use the method of maximum likelihood to estimate the coefficient vector β. In this paper, a stated preference survey is described which involved a random sample of 202 drivers in Hong ong. The modified multinomial logit model is used to study the route choice of drivers who are assumed to have different degrees of uncertainty concerning the traffic conditions. Factors affecting drivers route choice include travel time, travel cost and travel time reliability. The distribution of unobservable heterogeneity, G(µ), is assumed to be a normal distribution N(1, σ 2 ), where the variance σ 2 is to be estimated from the data. Figure 1 below shows the effect of σ of the scale parameter µ on the value of the likelihood function. It is clear that when σ equals 0.70, the likelihood of the sample attains its maximum. The corresponding estimates of the coefficient vector can be found accordingly. Effect of dispersion of mu on the -log-likelihood -lnl 385 384.8 384.6 384.4 384.2 384 383.8 383.6 0 0.2 0.4 0.6 0.8 1 1.2 S.D. of mu Figure 1: Effect of dispersion of Mu This paper demonstrates that if the assumption of homogeneous population in term of the value µ is violated, which could be the case when the TIS becomes very popular, the traditional multinomial logit model cannot be used directly. A modified version of the multinomial logit model that includes the µ as an additional parameter is introduced. Empirical data obtained

from a recent survey confirm that the modified version of the multinomial logit model could provide better fit to the data. REFERENCE Lam, W.S.P. and Lo, H.P. (1997). A Random-Coefficients Logit Model Applied to Transportation. Proceedings of the Second Conference of Hong ong Society of Transportation Studies, Hong ong December, pp. 225-231. Louviere, J.J., Hensher, D.A., and Swait, J.D. (2000). Stated Choice Methods-Analysis and Applications. Cambridge University Press. Manski, C.F. (1977). The Structure of Random Utility Models. Theory and Decision, 8, pp 229-254.