The private (unnoticed) welfare cost of highway speeding behavior from time saving misperceptions

Our daily routines are cluttered with intuitive trade-offs, judgments and decisions. Unfortunately, even in case that individuals are aware of the fact that there might be potential sources of misperceptions, intuitive behavior within routines may lead us to biased judgments. As regards transport, research has demonstrated that many car drivers are subject to a ‘time saving bias’, reflecting the failure of individuals to correctly predict the right potential of speed to save journey time. The resulting overestimation of the time saving benefit from speeding leads travelers to drive faster than privately optimal and, as a consequence, causes excessive costs in particular due to higher fuel consumption and accident risk, thereby reducing personal well-being. This paper develops a framework to determine the individual welfare cost of (the private willingness to pay to avoid) the ‘time saving bias’ and exemplarily uses highway data for Germany to calculate the magnitude of the bias. We find that if novice drivers were aware of the bias and expect to travel a moderate annual highway kilometrage over their lifetime as active drivers, they could be willing to pay a cash-equivalent of around €500–1500 in order to avoid the bias, e.g. either by novel car equipment (inverted speedometer, autonomous car technology) or in the form of driving school training programs. If the avoidance of the bias could be realized by the latter, a mark-up of at least roughly one-third (but more likely two-thirds) on regular total driving school fees would be justifiable on average. On a per kilometer basis, the individual cost is in the order of at most 1.2€-cents/km (upper bound prior to revenue recycling/use) for a representative driver. In the presence of costs of early or late arrival (schedule delay) it is far below 1.2€-cents/km. Surprisingly, when additionally account is taken of tax revenue recycling due to excess fuel consumption, the individual burden due to the bias vanishes.