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A Monopolistic Market for Advanced Traveller Information Systems and Road Use Efficiency

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Author Info

  • Rong Zhang

    () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Erik T. Verhoef

    () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

Abstract

This study presents a model for exploring the interactions between a transport market and a monopolistic market for advanced traveller information systems (ATIS). We examine the properties of the information market, and in particular, the relationship between monopoly information pricing and road system efficiency. From model experiments, we find that increasing information penetration will lead to negative external effects for the already informed drivers. Furthermore, monopoly information pricing is not the most attractive option from a system efficiency viewpoint, because of the relatively high price charged by the monopolist. Third, a user or a producer subsidy on the information market can help realise a second-best optimum of road use. Finally, relatively low uncertainty on the road and high information costs limit the monopolist’s profit on the information market, as well as relative system efficiency. While relatively inelastic demand for mobility negatively affects the monopolist’s profit, the relative social benefits from private information peak at intermediate demand elasticities.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-014/3.

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Date of creation: 25 Jan 2004
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Handle: RePEc:dgr:uvatin:20040014

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Keywords: Traffic congestion; traffic information; monopolistic pricing;

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References

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  1. Richard Arnott, 1989. "Does Providing Information to Drivers Reduce Traffic Congestion?," Discussion Papers 864, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Verhoef Erik T., 1997. "Externalities," Serie Research Memoranda 0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  3. David Levinson, 2003. "The Value of Advanced Traveler Information Systems for Route Choice," Working Papers 200307, University of Minnesota: Nexus Research Group.
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Cited by:
  1. Hiroaki Miyoshi, 2006. "Externalities and Taxation/Subsidization Policy of Vehicle Information and Communication System," ERSA conference papers ersa06p239, European Regional Science Association.
  2. André De Palma & Robin Lindsey & Nathalie Picard, 2008. "Risk aversion, the value of information and traffic equilibrium," Working Papers hal-00349492, HAL.
  3. André De Palma & Nathalie Picard, 2005. "Congestion on risky routes with risk adverse drivers," ERSA conference papers ersa05p423, European Regional Science Association.

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