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Risk aversion, the value of information and traffic equilibrium

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Author Info

  • André De Palma

    (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, ENS Cachan - Ecole Normale Supérieure de Cachan - École normale supérieure de Cachan - ENS Cachan)

  • Robin Lindsey

    (University of Alberta, Canada - University of Alberta)

  • Nathalie Picard

    (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise)

Abstract

Information about traffic conditions has traditionally been conveyed to drivers by radio and variable message signs, and more recently via the Internet and Advanced Traveler Information Systems. This has spurred research on how travelers respond to information, how much they are willing to pay for it and how much they are likely to benefit from it collectively. In this paper we analyze the decisions of drivers whether to acquire information and which route to take on a simple congested road network. Drivers vary in their degree of risk aversion with respect to travel time. Four information regimes are considered: No information, Free information which is publicly available at no cost, Costly information which is publicly available for a fee, and Private information which is available free to a single individual. Private information is shown to be individually more valuable than either Free or Costly information, while the benefits from Free and Costly information cannot be ranked in general. Free or Costly information can decrease the expected utility of drivers who are very risk-averse, and with sufficient risk aversion in the population the aggregate compensating variation for information can be negative.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00349492.

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Date of creation: Dec 2008
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Handle: RePEc:hal:wpaper:hal-00349492

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Related research

Keywords: Transportation; route choice; information provision; expected utility; congestion;

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References

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  1. Simon P. Anderson & André De Palma, 2008. "Information Congestion," Working Papers hal-00349516, HAL.
  2. de Palma, André & Picard, Nathalie, 2005. "Route choice decision under travel time uncertainty," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(4), pages 295-324, May.
  3. Zhang, Rong & Verhoef, Erik T., 2006. "A monopolistic market for advanced traveller information systems and road use efficiency," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(5), pages 424-443, June.
  4. Caspar G. Chorus & Eric J. E. Molin & Bert Van Wee, 2005. "Use and Effects of Advanced Traveller Information Services (ATIS): A Review of the Literature," Transport Reviews, Taylor & Francis Journals, vol. 26(2), pages 127-149, September.
  5. Kenneth A. Small & Clifford Winston & Jia Yan, 2005. "Uncovering the Distribution of Motorists' Preferences for Travel Time and Reliability," Econometrica, Econometric Society, vol. 73(4), pages 1367-1382, 07.
  6. Emmerink, Richard H M, et al, 1998. "Information Effects in Transport with Stochastic Capacity and Uncertainty Costs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 89-110, February.
  7. Robin Lindsey & Andre de Palma, 1998. "Information and Usage of Congestible Facilities Under Different Pricing Regimes," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 666-692, August.
  8. Brownstone, David & Small, Kenneth A., 2005. "Valuing time and reliability: assessing the evidence from road pricing demonstrations," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(4), pages 279-293, May.
  9. Richard Arnott & Andre De Palma & Robin Lindsey, 1993. "Information And Usage Of Free-Access Congestible Facilities," Boston College Working Papers in Economics 238, Boston College Department of Economics.
  10. André de Palma & Moshe Ben-Akiva & David Brownstone & Charles Holt & Thierry Magnac & Daniel McFadden & Peter Moffatt & Nathalie Picard & Kenneth Train & Peter Wakker & Joan Walker, 2008. "Risk, Uncertainty and Discrete Choice Models," THEMA Working Papers 2008-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  11. Kobayashi, Kiyoshi, 1994. "Information, Rational Expectations and Network Equilibria--An Analytical Perspective for Route Guidance Systems," The Annals of Regional Science, Springer, vol. 28(4), pages 369-93, December.
  12. Lam, T.C. & Small, K.A., 2000. "The Value of Time and Reliability: Measurement from a Value Pricing Experiment," Papers 00-02, California Irvine - School of Social Sciences.
  13. Richard H. M. Emmerink & Erik T. Verhoef & Peter Nijkamp & Piet Rietveld, 1996. "Endogenising demand for information in road transport," The Annals of Regional Science, Springer, vol. 30(2), pages 201-222.
  14. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
  15. Yang, Hai, 1998. "Multiple equilibrium behaviors and advanced traveler information systems with endogenous market penetration," Transportation Research Part B: Methodological, Elsevier, vol. 32(3), pages 205-218, April.
  16. Lo, Hong K. & Szeto, W. Y., 2002. "A methodology for sustainable traveler information services," Transportation Research Part B: Methodological, Elsevier, vol. 36(2), pages 113-130, February.
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Cited by:
  1. repec:dgr:uvatin:2010110 is not listed on IDEAS
  2. Fosgerau, Mogens & Lindsey, Robin, 2013. "Trip-timing decisions with traffic incidents," MPRA Paper 48708, University Library of Munich, Germany.
  3. Piet Rietveld, 2010. "The Economics of Information in Transport," Tinbergen Institute Discussion Papers 10-110/3, Tinbergen Institute.

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