Information policy in road transport with elastic demand: Some welfare economic considerations

Abstract This paper analyses the welfare impacts of providing different types of information to a group of potential road users. Two groups of drivers are considered: informed and uninformed ones and three kinds of information are dealt with: perfect, imperfect and no information. The link travel cost functions are assumed to be stochastic and the information concerns these random fluctuations. The analysis is limited to a one and two link network and it is further assumed that the actors in the model base their decision-making on rational expectations. Under the assumptions that demand and link travel cost functions are linear and that the population of travellers consists of a homogeneous group except for their respective willingness-to-pay for making a trip, it is found that both the provision of perfect and imperfect information leads to a strict Pareto improvement. Furthermore, the analysis reveals that the more perfect the information, the more efficient the use of the transport network. Finally, the analysis concerning the two link network (two routes running in parallel) shows that beneficial route split effects only exist when (1) the number of informed drivers is relatively small and (2) the stochastic shocks in the link travel cost function are relatively large. In these cases, the benefits to informed drivers are substantially larger than when only mode split effects take place.