On the consequences of behavioural adaptations in the cost-benefits analysis of road safety measures
It is sometimes argued that road safety measures or automobile safety standards fail to save lives because safer highways or safer cars induce more dangerous driving. A similar but less extreme view is that ignoring the behavioral adaptation of drivers would bias the cost–benefit analysis of a traffic safety measure. This article derives cost–benefit rules for automobile safety regulation when drivers may adapt their risk-taking behavior in response to changes in the quality of the road network. The focus is on the financial externalities induced by accidents because of the insurance system as well as on the consequences of drivers’ risk aversion. We establish that road safety measures are Pareto improving if their monetary cost is lower than the difference between their (adjusted for risk aversion) direct welfare gain with unchanged behavior and the induced variation in insured losses due to drivers’ behavioral adaptation. The article also shows how this rule can be extended to take other accident external costs into account.
Journal of Risk and Insurance, 72: 577-599, 2005
Citation
@article{gossner2005,
author = {Gossner, Olivier and Picard, Pierre},
title = {On the Consequences of Behavioural Adaptations in the
Cost-Benefits Analysis of Road Safety Measures},
journal = {Journal of Risk and Insurance},
date = {2005},
url = {https://gossner.me/papers/on-the-consequences-of-behavioural-adaptations-in-the-cost-benefits-analysis-of-road.html},
langid = {en},
abstract = {It is sometimes argued that road safety measures or
automobile safety standards fail to save lives because safer
highways or safer cars induce more dangerous driving. A similar but
less extreme view is that ignoring the behavioral adaptation of
drivers would bias the cost–benefit analysis of a traffic safety
measure. This article derives cost–benefit rules for automobile
safety regulation when drivers may adapt their risk-taking behavior
in response to changes in the quality of the road network. The focus
is on the financial externalities induced by accidents because of
the insurance system as well as on the consequences of drivers’ risk
aversion. We establish that road safety measures are Pareto
improving if their monetary cost is lower than the difference
between their (adjusted for risk aversion) direct welfare gain with
unchanged behavior and the induced variation in insured losses due
to drivers’ behavioral adaptation. The article also shows how this
rule can be extended to take other accident external costs into
account.}
}