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Congestion, risk aversion and the value of information

Author

Listed:
  • André de Palma

    (THEMA, University of Cergy-Pontoise, and ENPC, France)

  • Robin Lindsey

    (University of Alberta, Canada)

  • Nathalie Picard

    (THEMA, University of Cergy-Pontoise, and INED, France)

Abstract

Information about traffic conditions is conveyed to drivers by radio and variable message signs, and more recently available via the Internet and Advanced Traveler Information Systems (ATIS). This has spurred research on how travelers respond to information, how much they are likely to benefit from it and how much they are willing to pay for it. We analyze the decisions of drivers whether to acquire information and which route to take on a simple congested road network. 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. We find that Private information is individually more valuable than either Free or Costly information, while the benefits from Free and Costly information cannot be ranked in general. We also find that Free or Costly information can decrease the expected utility of drivers who are sufficiently risk-averse.

Suggested Citation

  • André de Palma & Robin Lindsey & Nathalie Picard, 2007. "Congestion, risk aversion and the value of information," THEMA Working Papers 2007-20, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2007-20
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