Commuters’ preferences for fast and reliable travel: A semi-parametric estimation approach

• We use semi-parametric econometrics to analyse observed and unobserved heterogeneity.
• Our local latent class model allows for a flexible incorporation of heterogeneity.
• We estimate the distributions of values of travel time and schedule delay savings.
• We apply a new entropy criterion to estimate the optimal number of classes.

We employ a semi-parametric estimation approach to analyse observed and unobserved heterogeneity in the value of savings in travel time and schedule delay. Our econometric approach allows for the estimation of unobserved and observed heterogeneity in preferences in a flexible way, meaning that we do not put any structure on how individual characteristics (such as income and age) relate to the value of savings in travel time and schedule delay. Using data from a stated choice experiment, we illustrate the estimation approach and find that there is substantial heterogeneity in the value of savings in travel time and schedule delay. For our data, we find that unobserved heterogeneity is more important than heterogeneity related to individual characteristics.