Strategic Information Platforms in Transportation Networks

Abstract

We investigate the effect of information/navigation platforms in transportation networks. Specifically, we analyze the outcome when these platforms are owned by for-profit strategic companies such as Google and Apple. We consider two business models, one that makes a profit through advertisements and user information collection, and one that generates revenue from its user by charging a subscription fee. We show that social welfare in an environment with a single platform can be higher than the one when multiple platforms compete with one another. This is in contrast to the standard result for classical goods where competition always improves social welfare. Most importantly, we show that in a competitive environment with multiple platforms, each platform finds it optimal to disclose its information perfectly about the current condition of the network for free. Consequently, in a competitive market (almost) all information platforms must have an ad-based business model and reveal perfect information about the transportation network. Our results provide a purely economic justification on why in practice no navigation application discloses partial information to improve the congestion as suggested previously in the literature.