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economic theory based models

# economic theory based models - ECONOMIC THEORY BASED MODELS...

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ECONOMIC THEORY BASED MODELS Elasticity (Econometric) Models Utility-Maximizing Models

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Some Properties of Elasticity (Econometric) Models Direct estimation of demand. Models based on economic consumer behavior . Assumptions of constant elasticities (direct and cross). Simultaneous prediction of many travel decisions (generation, distribution, mode-choice, route choice). Use of abstract mode concept: Demand related to level-of-service (LOS), not to name or appearance of that mode. Implicit assumption that demand for a particular mode is not only related to LOS of that mode, but to LOS of all other modes competing in that market
Elasticity Models Assume a constant elasticity demand V P dP dV p = ε P dP V dV P ε = dP dV P P V 1 1 = ε ( 29 ( 29 c P V P + = ln ln ε P P V ε α =

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Example: Assumptions: Elasticity of demand w.r.t. fare for transit = -1.25 Transit carries 10,000 passengers at \$0.40/trip Problem: Find change in patronage due to fare increase to \$0.45/trip
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