# An Inattention Model for Traveler Behavior with e-Coupons

## TL;DR

This paper develops an inattention model for traveler coupon redemption behavior, incorporating unawareness into a Markov decision process framework, improving explanation of observed data and informing better coupon strategies.

## Contribution

It introduces a novel inattention model for unawareness of coupons, enhancing the predictive accuracy of traveler redemption behavior models.

## Key findings

- The inattention model better fits observed redemption data.
- Unawareness negatively impacts coupons' promotional effectiveness.
- Simulation quantifies the effect of unawareness on promotion outcomes.

## Abstract

In this study, we consider traveler coupon redemption behavior from the perspective of an urban mobility service. Assuming traveler behavior is in accordance with the principle of utility maximization, we first formulate a baseline dynamical model for traveler's expected future trip sequence under the framework of Markov decision processes and from which we derive approximations of the optimal coupon redemption policy. However, we find that this baseline model cannot explain perfectly observed coupon redemption behavior of traveler for a car-sharing service. To resolve this deviation from utility-maximizing behavior, we suggest a hypothesis that travelers may not be aware of all coupons available to them. Based on this hypothesis, we formulate an inattention model on unawareness, which is complementary to the existing models of inattention, and incorporate it into the baseline model. Estimation results show that the proposed model better explains the coupon redemption dataset than the baseline model. We also conduct a simulation experiment to quantify the negative impact of unawareness on coupons' promotional effects. These results can be used by mobility service operators to design effective coupon distribution schemes in practice.