The Annual Meeting of the RSAI – The Israeli Branch, Tel-Aviv University , January 10, 2010

1. Development and estimation of a semi-compensatory residential choice model with a flexible error structure Sigal Kaplan, ShlomoBekhor, YoramShiftan Faculty of Civil and Environmental Engineering, Technion The Annual Meeting of the RSAI – The Israeli Branch, Tel-Aviv University, January 10, 2010

2. Motivation When faced with many alternatives, people apply a sequence of non-compensatory heuristics followed by a compensatory evaluation (Payne , 1976).

3. Motivation Residential choice models: • are mostly Multinomial logit • necessitate exogenous choice set formation • choice set formation independent of individual characteristics Semi-compensatory models: • are based on Manski’s (1977) formula • have 2J-1 theoretical choice sets for J alternatives • are estimated only for a few alternatives • involve thresholds that are independent of individual characteristics • do not account for correlation patterns and population heterogeneity

4. Research objectives

5. Model formulation Universal realm of alternatives Overtly specified criteria thresholds Conjunctive heuristic Choice set formation stage No Yes Viable choice set Abort? Unmanageable choice set Utility maximization Preference structure Choice stage No choice Chosen alternative

6. Model formulation Proposed model: Observed choice i Observed choice set S Nested logit or random coefficients logit Observed combination of criteria thresholds that yield the choice set S Multidimensional mixed ordered-response model

7. Model formulation MMOP-NL model:

8. Model formulation MMOP-RCL:

9. Empirical context • Regional impact of students:

10. Survey design Technion campus

11. Survey design Questionnaire socio-economic, price perceptions, travel attitudes and study preferences Questionnaire socio-economic, price perceptions, travel attitudes and study preferences Respondent’s information Yes No Verification Database Conjunctive choice set formation Criteria thresholds specification (e.g., price, rooms, noise level, parking) Conjunctive choice set formation Criteria thresholds specification (e.g., price, rooms, noise level, parking) Synthetically generated apartment dataset SQL query No 3 < j <100 Yes Utility-based choice stage Rank three most preferred apartments from the choice set Utility-based choice stage Rank three most preferred apartments from the choice set Respondent’s criteria thresholds and chosen apartment Yes Verification No

12. Survey design

13. Model specification Three criteria are represented in the estimated model: • apartment sharing • neighborhood • monthly rent price Universal realm of alternatives: 200 apartments • adjacent to campus with little employment or leisure • far from campus with leisure activities, shopping and jobs Explanatory variables: • personal characteristics • apartment attributes Nested structure: floor number Taste variation: renovation status, view and security bars.

14. Model estimation results

15. Model estimation results

16. Model estimation results

17. Conclusions The proposed semi-compensatory model: • is applicable to large universal realms • includes a probabilistic choice set formation dependent on individual characteristics • includes a flexible error structure The model estimation results shows the importance of incorporating a flexible error structure into semi-compensatory models The proposed model is a viable option for real-world applications and it can be readily incorporated within activity-based models and joint residential and transportation models.

18. Thank you! The Annual Meeting of the RSAI – The Israeli branch, Tel-Aviv University, January 10, 2010