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Information and Usage of Free-Access Congestible Facilities with Stochastic Capacity and Demand

Richard Arnott (), André de Palma () and Charles Lindsey ()

International Economic Review, 1996, vol. 37, issue 1, 181-203

Abstract: The authors investigate the effect of information on users' participation decisions at a free-access congestible facility that is subject to unpredictable fluctuations in capacity and demand. With demand isoelastic in user cost and user cost isoelastic in the ratio of demand to capacity, optimal design capacity is larger with mean-preserving spreads in capacity and demand if and only if demand elasticity is less than one. Expected welfare is greater with better information. Interestingly, with nonconstant elasticity demand and/or user costs, information can be welfare reducing. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1996
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Handle: RePEc:ier:iecrev:v:37:y:1996:i:1:p:181-203