Advanced Search
MyIDEAS: Login to save this paper or follow this series

Congestion on risky routes with risk adverse drivers

Contents:

Author Info

  • André De Palma

    ()

  • Nathalie Picard

    ()

Abstract

We study the impact of information on risk adverse drivers who maximize their von Neumann and Morgerstern expected utility (rather than minimizing expected travel time). The preferences of the users are described by their utility functions. Beside the (potentially inconsistent) mean variance model used so far in transportation, we consider three other standard utility functions: the mean standard deviation model, and the CARA and CRRA utility functions. We show that maximization of expected utility provides a more general formulation than minimization of expected travel time (the latter case corresponds to the standard Wardrop principle). We illustrate the proposed approach with a simple network which consists in one origin/one destination and two routes in parallel. Total demand is inelastic. Capacity on one route is constant and on the other route it is stochastic, and depends on the states of nature, with two possible values. We assume that all users have the same value of time but that they differ in their risk aversion parameter. Equilibrium travel time then depends on the distribution of risk aversion. We consider two polar information regimes: no information and full information. We study the differential impacts of information according to the level of risk aversion, and compute the social value of information. We introduce a formula to compute the value of information that is the individual willingness to pay for information (or in economic terms, the compensating variation). Moreover, we find that optimal route choice may depend on global factors (and not only on local traffic conditions). This has serious implications on the design of driver information systems. Finally, we study road pricing when users are risk neutral (and minimize the expected travel time) and when users are risk adverse. We compare the level of tolls, as well as the benefits of road pricing with and without taking into account risk aversion.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa05/papers/423.pdf
Download Restriction: no

Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p423.

as in new window
Length:
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:wiw:wiwrsa:ersa05p423

Contact details of provider:
Postal: Welthandelsplatz 1, 1020 Vienna, Austria
Web page: http://www.ersa.org

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Joop Hartog & Ada Ferrer-i-Carbonell & Nicole Jonker, 2000. "On a Simple Survey Measure of Individual Risk Aversion," CESifo Working Paper Series, CESifo Group Munich 363, CESifo Group Munich.
  2. 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, Elsevier, vol. 40(5), pages 424-443, June.
  3. Noland, Robert B. & Small, Kenneth A. & Koskenoja, Pia Maria & Chu, Xuehao, 1997. "Simulating Travel Reliability," University of California Transportation Center, Working Papers qt30w220k0, University of California Transportation Center.
  4. Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262572249, December.
  5. André de Palma & Nathalie Picard, 2004. "Route Choice behavior with risk averse users," THEMA Working Papers, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise 2004-09, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  6. David Levinson, 2003. "The Value of Advanced Traveler Information Systems for Route Choice," Working Papers, University of Minnesota: Nexus Research Group 200307, University of Minnesota: Nexus Research Group.
  7. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 1(1), pages 121-54, Summer.
  8. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 263-91, March.
  9. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1996. "Information and Usage of Free-Access Congestible Facilities with Stochastic Capacity and Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 181-203, February.
  10. Richard Arnott, 1989. "Does Providing Information to Drivers Reduce Traffic Congestion?," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 864, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Daniel McFadden, 2001. "Economic Choices," American Economic Review, American Economic Association, American Economic Association, vol. 91(3), pages 351-378, June.
  12. Richard Arnott & Andre De Palma & Robin Lindsey, 1993. "Information And Usage Of Free-Access Congestible Facilities," Boston College Working Papers in Economics, Boston College Department of Economics 238, Boston College Department of Economics.
  13. Camerer, Colin F, 1989. " An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, Springer, vol. 2(1), pages 61-104, April.
  14. de Palma, André & Picard, Nathalie, 2005. "Route choice decision under travel time uncertainty," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 39(4), pages 295-324, May.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa05p423. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.