Welfare Effects of Road Pricing and Traffic Information Under Alternative Ownership Regimes
VU University Amsterdam - Department of Spatial Economics
Erik T. Verhoef
VU University Amsterdam - Department of Spatial Economics; VU University Amsterdam - Faculty of Economics and Business Administration; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)
Thomas De Graaff
VU University Amsterdam - Faculty of Economics and Business Administration
September 2, 2010
Tinbergen Institute Discussion Paper No. 10-091/3
This paper models strategic interactions between a product supplier, a provider of information about product quality, and end users, in the context of road transportation. Using a game-theoretical analysis of suppliers' pricing strategies, we assess the social welfare effects of traffic information under various road markets with different ownership regimes. The results show that in this context, the distortive welfare effect of monopolistic information pricing appears small to negligible. Collusion of the road operator and information provider yields higher social welfare than independent pricing by two firms. The intuition behind this result resembles that behind the welfare effects of double marginalization, but it is not exactly the same, as traffic information is not strictly complementary to road use.
Number of Pages in PDF File: 34
Keywords: Willingness to Pay for Information, Private Road Operator, Private Information Provider, ICT
JEL Classification: L11, L15, R41, R48working papers series
Date posted: September 3, 2010
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