A Dynamic Formulation for Car Ownership Modeling

Abstract

Discrete choice models are commonly used in transportation planning and modeling, but their theoretical basis and applications have been mainly developed in a static context. In this paper, we propose an estimation technique for analyzing the impact of technological changes on the dynamic of consumer demand. The proposed research presents a dynamic formulation that explicitly models market evolution and accounts for consumers’ expectations of future product characteristics. The timing of consumers’ decisions is formulated as a regenerative optimal stopping problem where the agent must decide on the optimal time of purchase. This model frame will be further improved by modeling the choice from a set of differentiated products whose characteristics randomly change over time. The framework proposed is developed and applied in the context of car ownership.