Welfare effects of road pricing and traffic information under alternative ownership regimes

This paper models strategic interactions between a road supplier, a provider of traffic information, and road users, with stochastic travel times. Using a game-theoretical analysis of suppliers’ pricing strategies, we assess the social welfare effects of traffic information under various ownership regimes. The results show that the distortive welfare effect of monopolistic information pricing appears relatively small. 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 is not exactly the same, as traffic information is not strictly complementary to road use.

► Stylized game-theoretical model of the market with independent information provider.
► Strategic pricing of the market agents is analyzed.
► Social welfare distortive effect of monopolistic information price is small.
► We detect double marginalization effect in the market.