Violations of Expected Utility Theory in Route-Choice Stated Preferences: Certainty Effect and Inflation of Small Probabilities

Abstract

Common travel-choice models are based on the maximum utility assumption. However, the use of expected utility theory in descriptive models of individual choice has been criticized by behavioral scientists and recently also by transportation researchers. The aim of this work is to examine whether violations of expected utility theory may be found in travelers' stated-preference behavior. In this work, a route-choice stated-preference experiment was conducted. A questionnaire, inspired by experiments of Kahneman and Tversky, presented simple route-choice problems. Evidence was found of two violations of expected utility theory. The first is known as the Allais paradox (certainty effect), which is demonstrated by a situation in which the extreme underweighting of high probabilities, which fall short of certainties, makes certain (low) travel time outcomes very attractive. Evidence of another violation of expected utility theory, inflation of small probabilities, is shown on the basis of a set of stated-preference route-choice problems. The experimental results may be explained by prospect theory, an alternative model of decision making under risk.