ELICITING RISK ATTITUDES FROM ROUTE CHOICES OVER SIMULATED DRIVING CHOICES

Abstract

Transportation planners and engineers alike have identified that drivers’ risk attitudes have a significant effect on their route and departure time choices. The authors utilize methods from experimental economics to elicit risk attitudes through controlled incentivized experiments in driving simulators with actual monetary consequences. This last feature of the design can eliminate hypothetical biases observed in other studies that utilize purely hypothetical questions. They identify risk attitudes by defining simulated route choices as lotteries that may pay some money for sure or different monetary rewards with some uncertainty. They also use structural estimation to estimate risk attitudes in the sample and allow for both Expected Utility theory and Rank-Dependent Utility theory. The econometric approach applies the “contextual utility” correction by Wilcox (2011) to control for “size effects” that have been identified in the estimation of value of time and reliability. The experimental design allows the authors to compare risk attitudes across two different regions in the US and study the demographic determinants of risk aversion. Both under Expected Utility and Rank-Dependent Utility, risk attitudes are heterogeneous in the sample and largely explained by subjects’ age and accumulated wealth during the experiment. Finally, the authors find no evidence of a structural difference between the two traffic regions used in this study.

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