The Impact of Information Availability on Destination Choice

• Date: 01 September 2016
• Author: A. De Palma,F. Combes
• Published date: 01 September 2016
• DOI: http://doi.org/10.1111/jems.12152

The Impact of Information Availability

on Destination Choice

F. COMBES

Cerema—Center for Studies and Expertise on Risks

Environment, Mobility, and Urban and Country Planning Technical Division for Transportation

Infrastructures and Materials BP 214

77487 Provins Cedex France and SPLOTT, IFSTTAR

francois.combes@cerema.fr

A. DEPALMA

Ecole Normale Suprieure de Cachan

Dpartement Economie et Gestion. 61 avenue du Prsident Wilson 94230 Cachan

France and Department of Economics KU Leuven

Belgium

andre.depalma@ens-cachan.fr

Consider a population of agents who choose one among a set of destinations located along a

rectilinear road. Each of these destinations has a certain utility, modeled by a random variable.

We compare a situation where the agents have to explore the destinations to observe the value

of their utilities, to a situation where they know these values beforehand. We show that more

information yields a higher welfare to the agents, and also, perhaps counter-intuitively, higher

distance traveled.

1. Introduction

Information theory plays an important role in economics. The decisions of agents de-

pend, above all, on what they know about the available alternatives. In addition, col-

lecting information is often costly,or requires an effort; therefore, agents have to balance

the benefits of obtaining information against the related costs. Information theory has

influenced various economic fields for decades; let us quote, for example, Gollier et al.

(2005) in finance, McCall (1970) in labor economics, and Kuksov and Villas-Boas (2010)

in marketing.

In the transport economics literature, it is generally assumed that travelers have

a perfect knowledge of their options (e.g., routes, modes, destinations). Several papers

focus on the impact on travelers of the absence or of imperfect information. Examples of

such studies are de Palma and Picard (2006), Emmerink et al. (1996), Chorus et al. (2007);

see also the review of Rietveld (2011). Those papers generally examine the relationship

between information availability and transport systems’ efficiency; some of them con-

clude that providing more information is not necessarily welfare improving. However,

they are mainly concerned with route choice. The influence of information availability

on destination choice, studied in this paper, remains to be explored analytically.

We thank Predit, French Transport Department (ENS Cachan, and KUL) for their financial support. We

benefited fromdiscussion with Stef Proost, Michel de Lara, Nathalie Picard, Jean-Luc Prigent, Simon Anderson,

and Nicolas Wagner. We also sincerely thank the referees, Professor Daniel Spulberg and Professor Jacques

Thisse, for their comments, which greatly improved the quality of the paper.The usual disclaimer applies.

C2015 Wiley Periodicals, Inc.

Journal of Economics & Management Strategy, Volume25, Number 3, Autumn 2016, 678–687