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The value of reliability

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  • Fosgerau, Mogens
  • Karlström, Anders

Abstract

We derive the value of reliability in the scheduling of an activity of random duration, such as travel under congested conditions. Using a simple formulation of scheduling utility, we show that the maximal expected utility is linear in the mean and standard deviation of trip duration, regardless of the form of the standardised distribution of trip durations. This insight provides a unification of the scheduling model and models that include the standard deviation of trip duration directly as an argument in the cost or utility function. The results generalise approximately to the case where the mean and standard deviation of trip duration depend on the starting time. An empirical illustration is provided.

Suggested Citation

  • Fosgerau, Mogens & Karlström, Anders, 2010. "The value of reliability," Transportation Research Part B: Methodological, Elsevier, vol. 44(1), pages 38-49, January.
    • Handle: RePEc:eee:transb:v:44:y:2010:i:1:p:38-49
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    Keywords

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    JEL classification:

    • D0 - Microeconomics - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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