A Rank Dependent Scheduling Model

Tinbergen Institute Discussion Paper 10-069/3

30 Pages Posted: 11 Nov 2010

See all articles by Paul Koster

Paul Koster

VU University Amsterdam - Department of Spatial Economics

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics; Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Date Written: August 26, 2010

Abstract

This paper proposes an analytical framework for scheduling decisions of road travelers that takes into account probability weighting using rank dependent utility theory. The fundamental difference with the standard scheduling model based on expected utility is that the probabilities of arrivals are treated in a non-linear way. This paper shows how scheduling decisions are affected by the weighted probabilities of the traveler. We derive the costs of non-optimal chosen departure times because of probability weighting and show that if the parameterized probability weighting function is similar to what has been found for gambling, the costs of probability weighting for morning peak car travelers are around 3 per cent. For the full range of parameters tested, we find costs in the range of 0-24 percent of total travel costs.

Keywords: scheduling model, value of reliability, rank dependent utility

JEL Classification: R40, R41, R42, R49, D81

Suggested Citation

Koster, Paul and Verhoef, Erik T., A Rank Dependent Scheduling Model (August 26, 2010). Tinbergen Institute Discussion Paper 10-069/3. Available at SSRN: https://ssrn.com/abstract=1703483 or http://dx.doi.org/10.2139/ssrn.1703483

Paul Koster (Contact Author)

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 020 4446094 (Phone)
+31 020 4446004 (Fax)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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