Experience as a conditioning effect on choice: Does it matter whether it is exogenous or endogenous?
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Date
2021
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Abstract
Previous choice studies have proposed a way to condition the utility of each alternative in a
choice set on experience with the alternatives accumulated over previous periods, defned
either as a mode used or not in a most recent trip, or the mode chosen in their most recent
trip and the number of similar one-way trips made during the last week. The paper found
that the overall statistical performance of the mixed logit model improved signifcantly,
suggesting that this conditioning idea has merit. Experience was treated as an exogenous
infuence linked to the scale of the random component, and to that extent it captures some
amount of the heterogeneity in unobserved efects, purging them of potential endogeneity. The current paper continues to investigate the matter of endogeneity versus exogeneity. The proposed approach implements the control function method through the experience conditioning feature in a choice model. We develop two choice models, both using
stated preference data. The paper extends the received contribution in that we allow for
the endogenous variable to have an impact on the attributes through a two stage method,
called the Multiple Indicator Solution, originally implemented in a diferent context and for
a single (quality) attribute, in which stage two is the popular control function method. In
the frst stage, the entire utility expression associated with all observed attributes is conditioned on the prior experience with an alternative. Hence, we are capturing possible correlates associated with each and every attribute and not just one selected attribute. We fnd
evidence of potential endogeneity. The purging exercise however, results in both statistical
similarities and diferences in time and cost choice elasticities and mean estimates of the
value of travel time savings. We are able to identify a very practical method to correct for
possible endogeneity under experience conditioning that will encourage researchers and
practitioners to use such an approach in more advanced non-linear discrete choice models
as a matter of routine.
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Keywords
Experience, Exogeneity, Endogeneity, Mode choice applications, Choice elasticities, Value of travel time, Control function, Experience model residuals, Error components, Multiple indicator solution, Non-linear choice models, Heteroscedastic conditioning