Evaluating Alternative Operations Strategies to Improve Travel Time ...

SHRP 2 L11: Final Appendices
Table B.2 illustrates the value of the implied put option at various average annual speeds and logvariability.
This exhibit displays the certainty-equivalent value both in miles per hour and in
minutes of delay.
The data suggest that speed variability imposes a burden on highway users. A rational and riskneutral
user would be willing to sacrifice speed in order to avoid traveling considerably below the
average speed. This is especially the case when the log standard deviation in speeds is large
relative to the average speed.
Although intended only to be illustrative, the data in Table B.2 reveal that the volatility of speeds
relative to average speeds is not monotonically related to average speed in the real world. The
relative volatility and unreliability (and, hence, the value of speed guarantees in mph) is the largest
in the speed range of 45 mph. However, as Table B.2 illustrates, the value of the speed-guarantee
option (when expressed in minutes) declines monotonically with speed. Thus, a policy that
improves average speeds will decrease total delay, inclusive of the certainty-equivalent volatility
burden. Policies that reduce the volatility of speed directly (without necessarily improving average
speed) can also be shown to decrease total delay inclusive of unreliability.
DETERMINING THE ECONOMIC BENEFITS OF IMPROVING TRAVEL-TIME RELIABILITY Page B-12