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Incorporating Thresholds of Indifference in Probabilistic Choice Models

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  • K. S. Krishnan

    (General Motors Corporation, Warren, Michigan)

Abstract

Probabilistic choice models are often based on utility concepts which call for assessments by decision makers of available alternatives. These models assume that distinct utilities can be derived from the decision maker's expressed preferences. Such an assumption is generally valid if the decision maker can recognize arbitrarily small utility differences. If the decision maker is indifferent between the alternatives the corresponding utilities are expected to be similar. In this paper, the concept of minimum perceivable difference is introduced into the conventional binary logit model. It is postulated that two alternatives are perceived as different only if the absolute difference in their utilities exceeds a positive constant. For estimating the parameters of the new model a maximum likelihood technique is employed, and an empirical test of the model is conducted using data on travelers' choice of mode for accessing commuter rail service from Lindenwold (New Jersey) to downtown Philadelphia. The model predicts individuals' choices in a holdout sample significantly better than the conventional logit model.

Suggested Citation

  • K. S. Krishnan, 1977. "Incorporating Thresholds of Indifference in Probabilistic Choice Models," Management Science, INFORMS, vol. 23(11), pages 1224-1233, July.
    • Handle: RePEc:inm:ormnsc:v:23:y:1977:i:11:p:1224-1233
    DOI: 10.1287/mnsc.23.11.1224
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    Cited by:

    1. Wang, Hongfei & Guan, Hongzhi & Qin, Huanmei & Zhao, Pengfei, 2024. "Assessing the sustainability of time-dependent electric demand responsive transit service through deep reinforcement learning," Energy, Elsevier, vol. 296(C).
    2. Gao, Yanan & Rasouli, Soora & Timmermans, Harry & Wang, Yuanqing, 2018. "Trip stage satisfaction of public transport users: A reference-based model incorporating trip attributes, perceived service quality, psychological disposition and difference tolerance," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 759-775.
    3. Di, Xuan & Liu, Henry X., 2016. "Boundedly rational route choice behavior: A review of models and methodologies," Transportation Research Part B: Methodological, Elsevier, vol. 85(C), pages 142-179.
    4. Watling, David Paul & Rasmussen, Thomas Kjær & Prato, Carlo Giacomo & Nielsen, Otto Anker, 2018. "Stochastic user equilibrium with a bounded choice model," Transportation Research Part B: Methodological, Elsevier, vol. 114(C), pages 254-280.
    5. Bahamonde-Birke, Francisco J. & Navarro, Isidora & Ortúzar, Juan de Dios, 2017. "If you choose not to decide, you still have made a choice," Journal of choice modelling, Elsevier, vol. 22(C), pages 13-23.
    6. Obermeyer, Andy & Treiber, Martin & Evangelinos, Christos, 2015. "On the identification of thresholds in travel choice modelling," Journal of choice modelling, Elsevier, vol. 17(C), pages 1-9.
    7. Wayne DeSarbo & Kamel Jedidi & Joel Steckel, 1991. "A stochastic multidimensional scaling procedure for the empirical determination of convex indifference curves for preference/choice analysis," Psychometrika, Springer;The Psychometric Society, vol. 56(2), pages 279-307, June.
    8. Hanemann, W. Michael & Kanninen, Barbara, 1996. "The Statistical Analysis Of Discrete-Response Cv Data," CUDARE Working Papers 25022, University of California, Berkeley, Department of Agricultural and Resource Economics.
    9. Cantillo, Víctor & Amaya, Johanna & Ortúzar, J. de D., 2010. "Thresholds and indifference in stated choice surveys," Transportation Research Part B: Methodological, Elsevier, vol. 44(6), pages 753-763, July.
    10. Obermeyer Andy & Wieland Bernhard & Evangelinos Christos, 2014. "Die ökonomische Bewertung kleiner Reisezeiteinsparungen / The Economic Valuation of Small Travel Time Savings," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(1), pages 44-69, February.
    11. Xuan Di & Henry X. Liu & Shanjiang Zhu & David M. Levinson, 2017. "Indifference bands for boundedly rational route switching," Transportation, Springer, vol. 44(5), pages 1169-1194, September.
    12. Xinjie Zhang & Hongzhi Guan & Haiyan Zhu & Junze Zhu, 2019. "Analysis of Travel Mode Choice Behavior Considering the Indifference Threshold," Sustainability, MDPI, vol. 11(19), pages 1-23, October.
    13. Desheng Wu, 2017. "Pass-through decision analysis in a supply chain," Annals of Operations Research, Springer, vol. 257(1), pages 297-316, October.
    14. Zheng, Weimin & Liao, Zhixue & Qin, Jing, 2017. "Using a four-step heuristic algorithm to design personalized day tour route within a tourist attraction," Tourism Management, Elsevier, vol. 62(C), pages 335-349.
    15. Cantillo, Víctor & Heydecker, Benjamin & de Dios Ortúzar, Juan, 2006. "A discrete choice model incorporating thresholds for perception in attribute values," Transportation Research Part B: Methodological, Elsevier, vol. 40(9), pages 807-825, November.

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