Asymmetrical Preference Formation in Willingness to Pay Estimates

ABSTRACT: Individuals when faced with choices amongst a number of alternatives often adopt a variety of processing rules, ranging from simple linear to complex non-linear treatment of each attribute defining the offer of each alternative. In recent years, there has been a growing interest in the choice process as a basis of understanding how best to represent attributes in choice outcome models. In this paper, in the context of choice amongst tolled and non-tolled routes, we investigate the presence of asymmetry in preferences, drawing on ideas from prospect theory to test for framing effects and differential willingness to pay according to whether we are valuing gains or losses. The findings offer clear evidence of an asymmetrical response to increases and decreases in attributes when compared to the corresponding values for a reference alternative. The degree of asymmetry varies across attributes and population segments, but crucially is independent of the inclusion or otherwise of an additional constant for the reference alternative, contrary to earlier findings. KEY WORDS: Preference asymmetry, valuation of travel time savings