Risk Aversion, the Value of Information, and Traffic Equilibrium

Information about traffic conditions has traditionally been conveyed to drivers via radio, variable message signs, and, more recently, 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 on whether to acquire information and which routes to take on simple congested road networks. Drivers vary in their degrees of risk aversion with respect to travel time. Four information regimes are considered: no information, free information (publicly available at no cost), costly information (publicly available for a fee), and private information (available free to single individuals). 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; with sufficient risk aversion in the population, the aggregate compensating variation for information can be negative.