IDEAS home Printed from https://ideas.repec.org/a/eee/eejocm/v20y2016icp16-34.html
   My bibliography  Save this article

Impact of information on risk attitudes: Implications on valuation of reliability and information

Author

Listed:
  • Wijayaratna, Kasun P.
  • Dixit, Vinayak V.

Abstract

Risk attitudes are an important behavioural characteristic that influences people's valuation of information and reliability. In a transport context, information has become widely accessible to road users through ITS systems, GPS technology and the internet justifying the importance of understanding the valuation of information by travellers. There have been a number of studies that have looked at the value of information and the value of reliability for a road user. However, to date there has not been a study that explicitly evaluates the impact of having information within a choice set on an individual's risk attitudes, which ultimately affects their valuation for information and reliability. This study conducts a controlled laboratory experiment, using methods of experimental economics, to measure the risk attitudes of users with and without the presence of information in the choice set. A model derived from Expected Utility Theory is used to infer the risk attitudes of the participants. The results of the analysis indicate that the presence of information in the choice set reduces risk aversion, which causes a reduction in people's valuation of information and reliability. It is critical to systematically incorporate these differences into behaviour models, since neglecting this fundamental difference could result in erroneous policy decisions, with respect to overpricing information, or inappropriately allocating funds for information systems.

Suggested Citation

  • Wijayaratna, Kasun P. & Dixit, Vinayak V., 2016. "Impact of information on risk attitudes: Implications on valuation of reliability and information," Journal of choice modelling, Elsevier, vol. 20(C), pages 16-34.
    • Handle: RePEc:eee:eejocm:v:20:y:2016:i:c:p:16-34
    DOI: 10.1016/j.jocm.2016.09.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1755534515300592
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jocm.2016.09.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Carrion, Carlos & Levinson, David, 2012. "Value of travel time reliability: A review of current evidence," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(4), pages 720-741.
    2. Neuman, Tzahi & Neuman, Einat & Neuman, Shoshana, 2010. "Explorations of the effect of experience on preferences for a health-care service," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(3), pages 407-419, June.
    3. Lam, Terence C. & Small, Kenneth A., 0. "The value of time and reliability: measurement from a value pricing experiment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 37(2-3), pages 231-251, April.
    4. Denant-Boèmont, L. & Petiot, R., 2003. "Information value and sequential decision-making in a transport setting: an experimental study," Transportation Research Part B: Methodological, Elsevier, vol. 37(4), pages 365-386, May.
    5. Steffen Andersen & Glenn Harrison & Arne Hole & Morten Lau & E. Rutström, 2012. "Non-linear mixed logit," Theory and Decision, Springer, vol. 73(1), pages 77-96, July.
    6. L. Denant-Boèmont & R. Petiot, 2003. "Information value and sequential decision-making in a transport setting: an experimental study," Post-Print hal-02422690, HAL.
    7. Anthony Ziegelmeyer & Frédéric Koessler & Kene Boun My & Laurent Denant-Boèmont, 2008. "Road Traffic Congestion and Public Information: An Experimental Investigation," Journal of Transport Economics and Policy, University of Bath, vol. 42(1), pages 43-82, January.
    8. Li, Zheng & Hensher, David A. & Rose, John M., 2010. "Willingness to pay for travel time reliability in passenger transport: A review and some new empirical evidence," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(3), pages 384-403, May.
    9. Andersen, Steffen & Harrison, Glenn W. & Lau, Morten Igel & Rutström, E. Elisabet, 2010. "Preference heterogeneity in experiments: Comparing the field and laboratory," Journal of Economic Behavior & Organization, Elsevier, vol. 73(2), pages 209-224, February.
    10. Brownstone, David & Small, Kenneth A., 2005. "Valuing time and reliability: assessing the evidence from road pricing demonstrations," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(4), pages 279-293, May.
    11. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    12. Laurent Denant-Boemont & R. Petiot, 2003. "Information value and sequential decision-making in a transport setting: an experimental study," Post-Print halshs-02439268, HAL.
    13. David A. Hensher & Zheng Li, 2012. "Valuing Travel Time Variability within a Rank-Dependent Utility Framework and an Investigation of Unobserved Taste Heterogeneity," Journal of Transport Economics and Policy, University of Bath, vol. 46(2), pages 293-312, May.
    14. Hani S. Mahmassani & Gang-Len Chang & Robert Herman, 1986. "Individual Decisions and Collective Effects in a Simulated Traffic System," Transportation Science, INFORMS, vol. 20(4), pages 258-271, November.
    15. Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-279, May.
    16. Small, Kenneth A., 2001. "The Value of Pricing," University of California Transportation Center, Working Papers qt0rm449sx, University of California Transportation Center.
    17. James Cox & Vjollca Sadiraj & Ulrich Schmidt, 2015. "Paradoxes and mechanisms for choice under risk," Experimental Economics, Springer;Economic Science Association, vol. 18(2), pages 215-250, June.
    18. Kenneth A. Small & Clifford Winston & Jia Yan, 2005. "Uncovering the Distribution of Motorists' Preferences for Travel Time and Reliability," Econometrica, Econometric Society, vol. 73(4), pages 1367-1382, July.
    19. Dixit, Vinayak V. & Harb, Rami C. & Martínez-Correa, Jimmy & Rutström, Elisabet E., 2015. "Measuring risk aversion to guide transportation policy: Contexts, incentives, and respondents," Transportation Research Part A: Policy and Practice, Elsevier, vol. 80(C), pages 15-34.
    20. José‐María Abellán‐Perpiñán & José‐Luis Pinto‐Prades & Ildefonso Méndez‐Martínez & Xabier Badía‐Llach, 2006. "Towards a better QALY model," Health Economics, John Wiley & Sons, Ltd., vol. 15(7), pages 665-676, July.
    21. Charness, Gary & Gneezy, Uri & Imas, Alex, 2013. "Experimental methods: Eliciting risk preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 43-51.
    22. Bates, John & Polak, John & Jones, Peter & Cook, Andrew, 0. "The valuation of reliability for personal travel," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 37(2-3), pages 191-229, April.
    23. André de Palma & Robin Lindsey & Nathalie Picard, 2012. "Risk Aversion, the Value of Information, and Traffic Equilibrium," Transportation Science, INFORMS, vol. 46(1), pages 1-26, February.
    24. Rapoport, Amnon & Mak, Vincent & Zwick, Rami, 2006. "Navigating congested networks with variable demand: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 27(5), pages 648-666, October.
    25. Zheng Li & Alejandro Tirachini & David A. Hensher, 2012. "Embedding Risk Attitudes in a Scheduling Model: Application to the Study of Commuting Departure Time," Transportation Science, INFORMS, vol. 46(2), pages 170-188, May.
    26. Eran Ben-Elia & Erel Avineri, 2015. "Response to Travel Information: A Behavioural Review," Transport Reviews, Taylor & Francis Journals, vol. 35(3), pages 352-377, May.
    27. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-955, December.
    28. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, May.
    29. John D. Hey & Chris Orme, 2018. "Investigating Generalizations Of Expected Utility Theory Using Experimental Data," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 3, pages 63-98, World Scientific Publishing Co. Pte. Ltd..
    30. Jou, Rong-Chang, 2001. "Modeling the impact of pre-trip information on commuter departure time and route choice," Transportation Research Part B: Methodological, Elsevier, vol. 35(10), pages 887-902, November.
    31. Selten, R. & Chmura, T. & Pitz, T. & Kube, S. & Schreckenberg, M., 2007. "Commuters route choice behaviour," Games and Economic Behavior, Elsevier, vol. 58(2), pages 394-406, February.
    32. Amnon Rapoport & Tamar Kugler & Subhasish Dugar & Eyran J. Gisches, 2008. "Braess Paradox in the Laboratory: Experimental Study of Route Choice in Traffic Networks with Asymmetric Costs," Springer Optimization and Its Applications, in: Tamar Kugler & J. Cole Smith & Terry Connolly & Young-Jun Son (ed.), Decision Modeling and Behavior in Complex and Uncertain Environments, pages 309-337, Springer.
    33. Batley, Richard, 2007. "Marginal valuations of travel time and scheduling, and the reliability premium," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 43(4), pages 387-408, July.
    34. Hensher, David A. & Greene, William H. & Li, Zheng, 2011. "Embedding risk attitude and decision weights in non-linear logit to accommodate time variability in the value of expected travel time savings," Transportation Research Part B: Methodological, Elsevier, vol. 45(7), pages 954-972, August.
    35. Eran Ben-Elia & Ido Erev & Yoram Shiftan, 2008. "The combined effect of information and experience on drivers’ route-choice behavior," Transportation, Springer, vol. 35(2), pages 165-177, March.
    36. Mickaël Beaud & Thierry Blayac & Maïté Stéphan, 2012. "Value of travel time reliability: two alternative measures," Post-Print hal-01923412, HAL.
    37. Batley, Richard & Ibáñez, J. Nicolás, 2012. "Randomness in preference orderings, outcomes and attribute tastes: An application to journey time risk," Journal of choice modelling, Elsevier, vol. 5(3), pages 157-175.
    38. Small, Kenneth A, 1982. "The Scheduling of Consumer Activities: Work Trips," American Economic Review, American Economic Association, vol. 72(3), pages 467-479, June.
    39. Mickaël Beaud & Thierry Blayac & Maïté Stéphan, 2012. "Value of travel time reliability: two alternative measures," Post-Print hal-01923412, HAL.
    40. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56(4), pages 279-279.
    41. W. Burke Jackson & James V. Jucker, 1982. "An Empirical Study of Travel Time Variability and Travel Choice Behavior," Transportation Science, INFORMS, vol. 16(4), pages 460-475, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Shuo & Li, Chengyou & Wang, Zeru & Sun, Guanglin, 2023. "Digital skills and household financial asset allocation," Finance Research Letters, Elsevier, vol. 58(PC).
    2. Xiaohui Li & Hang Xiong & Jinghui Hao & Gucheng Li, 2024. "Impacts of internet access and use on grain productivity: evidence from Central China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-9, December.
    3. Kasun P Wijayaratna & Vinayak V Dixit & Laurent Denant-Boemont & S Travis Waller, 2017. "An experimental study of the Online Information Paradox: Does en-route information improve road network performance?," PLOS ONE, Public Library of Science, vol. 12(9), pages 1-17, September.
    4. Fang, Lan & Quan, Yurong & Mao, Hui & Chen, Shaojian, 2022. "The Information Communication Technology and Off-farm Employment of Rural Laborers: An Analysis Based on the Micro Data of China Family Panel Studies," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322088, Agricultural and Applied Economics Association.
    5. Xinming Zang & Zhenqi Guo & Jingai Ma & Yongguang Zhong & Xiangfeng Ji, 2021. "Target-Oriented User Equilibrium Considering Travel Time, Late Arrival Penalty, and Travel Cost on the Stochastic Tolled Traffic Network," Sustainability, MDPI, vol. 13(17), pages 1-22, September.
    6. Li, Zheng, 2018. "Unobserved and observed heterogeneity in risk attitudes: Implications for valuing travel time savings and travel time variability," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 112(C), pages 12-18.
    7. Emily K. M. Moylan & Michiel C. J. Bliemer & Taha Hossein Rashidi, 2022. "Travellers’ perceptions of travel time reliability in the presence of rare events," Transportation, Springer, vol. 49(4), pages 1157-1181, August.
    8. Fu, Jianhua & Zhang, Yongqing, 2020. "Valuation of travel time reliability: Considering the traveler's adaptive expectation with an indifference band on daily trip duration," Transportation Research Part A: Policy and Practice, Elsevier, vol. 140(C), pages 337-353.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dixit, Vinayak V. & Harb, Rami C. & Martínez-Correa, Jimmy & Rutström, Elisabet E., 2015. "Measuring risk aversion to guide transportation policy: Contexts, incentives, and respondents," Transportation Research Part A: Policy and Practice, Elsevier, vol. 80(C), pages 15-34.
    2. Zhaoqi Zang & Xiangdong Xu & Kai Qu & Ruiya Chen & Anthony Chen, 2022. "Travel time reliability in transportation networks: A review of methodological developments," Papers 2206.12696, arXiv.org, revised Jul 2022.
    3. Beaud, Mickael & Blayac, Thierry & Stéphan, Maïté, 2016. "The impact of travel time variability and travelers’ risk attitudes on the values of time and reliability," Transportation Research Part B: Methodological, Elsevier, vol. 93(PA), pages 207-224.
    4. Zhaoqi Zang & Richard Batley & Xiangdong Xu & David Z. W. Wang, 2022. "On the value of distribution tail in the valuation of travel time variability," Papers 2207.06293, arXiv.org, revised Dec 2023.
    5. Li, Zheng, 2018. "Unobserved and observed heterogeneity in risk attitudes: Implications for valuing travel time savings and travel time variability," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 112(C), pages 12-18.
    6. Abegaz, Dereje & Hjorth, Katrine & Rich, Jeppe, 2017. "Testing the slope model of scheduling preferences on stated preference data," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 409-436.
    7. Zheng Li & Alejandro Tirachini & David A. Hensher, 2012. "Embedding Risk Attitudes in a Scheduling Model: Application to the Study of Commuting Departure Time," Transportation Science, INFORMS, vol. 46(2), pages 170-188, May.
    8. Fu, Jianhua & Zhang, Yongqing, 2020. "Valuation of travel time reliability: Considering the traveler's adaptive expectation with an indifference band on daily trip duration," Transportation Research Part A: Policy and Practice, Elsevier, vol. 140(C), pages 337-353.
    9. Alejandro Tirachini & David Hensher & Michiel Bliemer, 2014. "Accounting for travel time variability in the optimal pricing of cars and buses," Transportation, Springer, vol. 41(5), pages 947-971, September.
    10. Mickaël Beaud & Thierry Blayac & Maïté Stéphan, 2014. "Measurements and properties of the values of time and reliability," Working Papers 14-06, LAMETA, Universtiy of Montpellier, revised Jul 2014.
    11. Rey, David & Dixit, Vinayak V. & Ygnace, Jean-Luc & Waller, S. Travis, 2016. "An endogenous lottery-based incentive mechanism to promote off-peak usage in congested transit systems," Transport Policy, Elsevier, vol. 46(C), pages 46-55.
    12. Teppei Kato & Kenetsu Uchida & William H. K. Lam & Agachai Sumalee, 2021. "Estimation of the value of travel time and of travel time reliability for heterogeneous drivers in a road network," Transportation, Springer, vol. 48(4), pages 1639-1670, August.
    13. Li, Hao & Tu, Huizhao & Hensher, David A., 2016. "Integrating the mean–variance and scheduling approaches to allow for schedule delay and trip time variability under uncertainty," Transportation Research Part A: Policy and Practice, Elsevier, vol. 89(C), pages 151-163.
    14. Paul Koster & Hans Koster, 2013. "Analysing Heterogeneity in the Value of Travel Time and Reliability: A Semiparametric Estimation Approach," ERSA conference papers ersa13p1032, European Regional Science Association.
    15. Agarwal, Sumit & Diao, Mi & Keppo, Jussi & Sing, Tien Foo, 2020. "Preferences of public transit commuters: Evidence from smart card data in Singapore," Journal of Urban Economics, Elsevier, vol. 120(C).
    16. Peer, Stefanie & Knockaert, Jasper & Verhoef, Erik T., 2016. "Train commuters’ scheduling preferences: Evidence from a large-scale peak avoidance experiment," Transportation Research Part B: Methodological, Elsevier, vol. 83(C), pages 314-333.
    17. Peer, Stefanie & Knockaert, Jasper & Koster, Paul & Tseng, Yin-Yen & Verhoef, Erik T., 2013. "Door-to-door travel times in RP departure time choice models: An approximation method using GPS data," Transportation Research Part B: Methodological, Elsevier, vol. 58(C), pages 134-150.
    18. Bhat, Chandra R. & Sardesai, Rupali, 2006. "The impact of stop-making and travel time reliability on commute mode choice," Transportation Research Part B: Methodological, Elsevier, vol. 40(9), pages 709-730, November.
    19. Xiao, Yu & Fukuda, Daisuke, 2015. "On the cost of misperceived travel time variability," Transportation Research Part A: Policy and Practice, Elsevier, vol. 75(C), pages 96-112.
    20. Carrion, Carlos & Levinson, David, 2012. "Value of travel time reliability: A review of current evidence," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(4), pages 720-741.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eejocm:v:20:y:2016:i:c:p:16-34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/journal-of-choice-modelling .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.