The last decades have seen an increased interest in the use of prospect theory to model route choice behaviour. According to prospect theory, choices are based on gains and losses measured against a reference point. Thus, what matters is the relative gain and not the final state of wealth or welfare. Its applications, however, have been facing the main issue of how to define the reference point. For situations involving monetary outcomes, zero is the usual reference point, which can be interpreted as the status quo of wealth or welfare. But the question is: what is the value that travellers use as a reference to distinguish gains and losses in the experienced travel times in route choice behaviour? Moreover, do all travellers have the same reference point or does heterogeneity in their behaviour play an important role?
The objective of this paper is to provide a behavioural interpretation of the reference point and in particular to account for the role of heterogeneity. With the aid of a case study we discuss the meaning of the reference point for route choice decisions and how heterogeneity plays a role and could be taken into account. Based on it prospect theory is directly applied in two model specifications and their results are compared. While one of these model specifications accounts for heterogeneity, the other considers no heterogeneity in travellers’ behaviour. Results show a significant increase in the ability of prospect theory to predict route choice behaviour by accounting for heterogeneity, in particular when the reference point is able to well capture travellers’ behaviour.