Voluntary internalization of speeding externalities with vehicle insurance
High speed is an important determinant of accidents for speeders as well as for other motorists. This paper develops a framework for analyzing instruments that encourage drivers to internalize the full consequences of their behavior with respect to choice of speed using Pay-As-You-Speed (PAYS) insurance, possibly as an extension of Pay-As-You-Drive (PAYD) insurance. We demonstrate how the combination of a Pigovian taxation scheme and PAYS can be designed in a setting involving two principals (the state and an insurance company) that affect the incentives of commuters to choose between driving and other modes of transport and for those that use the car mode to drive carefully. While the government is assumed to maximize overall social efficiency and therefore wants to implement marginal cost pricing, insurance companies do actuarial pricing, i.e. average cost pricing within risk classes that are homogeneous to the degree that the insurers have information about actual behavior. PAYS insurance improves the insurance industry’s possibility to differentiate premiums according to behavior and therefore to target risk classes in a better way than today. Moreover, since our framework is designed to accomplish differentiation by self-selection, compulsory regulation is not necessary, although there may be reason for the government to facilitate the implementation of the new technology.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 46 (2012)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Amihai Glazer & Esko Niskanen, 2000.
"Which Consumers Benefit from Congestion Tolls?,"
216, Government Institute for Economic Research Finland (VATT).
- Glazer, Amihai & Niskanen, Esko, 2000. "Which consumers benefit from congestion tolls?," University of California Transportation Center, Working Papers qt33d88115, University of California Transportation Center.
- Glazer, Amihai & Niskanen, Esko, 2000. "Which consumers benefit from congestion tolls?," University of California Transportation Center, Working Papers qt70v033nx, University of California Transportation Center.
- Bourgeon, Jean-Marc & Picard, Pierre, 2007.
"Point-record driving licence and road safety: An economic approach,"
Journal of Public Economics,
Elsevier, vol. 91(1-2), pages 235-258, February.
- Jean-Marc Bourgeon & Pierre Picard, 2007. "Point-record driving licence and road safety : an economic approach," Post-Print hal-00243024, HAL.
- Jean Marc Bourgeon & Pierre Picard, 2007. "Point-record driving licence and road safety: an economic approach," Post-Print hal-01172835, HAL.
- Boyer, Marcel & Dionne, Georges & Vanasse, Charles, 1991.
"Infractions au Code de la sécurité routière, infractions au Code criminel et gestion optimale de la sécurité routière,"
Société Canadienne de Science Economique, vol. 67(3), pages 279-305, septembre.
- Boyer, M. & Dionne, G. & Vanasse, C., 1990. "Infractions au Code de la Securite Routiere, Infractions au Code Criminel, et Gestion Optimale de la Securite Routiere," Cahiers de recherche 9024, Universite de Montreal, Departement de sciences economiques.
- Boyer, M. & Dionne, G. & Vanasse, C., 1990. "Infractions Au Code De La Securite Routiere, Infractions Au Code Criminel, Et Gestion Optimale De La Securite Routiere," Cahiers de recherche 9024, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Steven Shavell, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 541-562.
- Gunnar Lindberg, 2001. "Traffic Insurance and Accident Externality Charges," Journal of Transport Economics and Policy, University of Bath, vol. 35(3), pages 399-416, September.
- Kutzbach, Mark J., 2009. "Motorization in developing countries: Causes, consequences, and effectiveness of policy options," Journal of Urban Economics, Elsevier, vol. 65(2), pages 154-166, March.
- Ian W. H. Parry & Kenneth A. Small, 2005.
"Does Britain or the United States Have the Right Gasoline Tax?,"
American Economic Review,
American Economic Association, vol. 95(4), pages 1276-1289, September.
- Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future.
- Parry, Ian W. H., 2004.
"Comparing alternative policies to reduce traffic accidents,"
Journal of Urban Economics,
Elsevier, vol. 56(2), pages 346-368, September.
- Parry, Ian, 2003. "Comparing Alternative Policies to Reduce Traffic Accidents," Discussion Papers dp-03-07, Resources For the Future.
- Hultkrantz, Lars & Lindberg, Gunnar, 2009.
"Pay-As-You-Speed: An Economic Field-Experiment,"
2009:12, Örebro University, School of Business.
- Parry, Ian, 2005.
"Is Pay-As-You-Drive Insurance a Better Way to Reduce Gasoline than Gasoline Taxes?,"
dp-05-15, Resources For the Future.
- Ian W. H. Parry, 2005. "Is Pay-as-You-Drive Insurance a Better Way to Reduce Gasoline than Gasoline Taxes?," American Economic Review, American Economic Association, vol. 95(2), pages 288-293, May.
- Aaron S. Edlin & Pinar Karaca-Mandic, 2006.
"The Accident Externality from Driving,"
Journal of Political Economy,
University of Chicago Press, vol. 114(5), pages 931-955, October.
- Cohen, Alma & Dehejia, Rajeev, 2004.
"The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities,"
Journal of Law and Economics,
University of Chicago Press, vol. 47(2), pages 357-393, October.
- Alma Cohen & Rajeev Dehejia, 2003. "The Effect of Automobile Insurance and Accident Liability Laws in Traffic Fatalities," NBER Working Papers 9602, National Bureau of Economic Research, Inc.
- Steven Shavell, 2000. "On the Social Function and the Regulation of Liability Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 25(2), pages 166-179, April.
- Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics.
- Armelius, Hanna & Hultkrantz, Lars, 2006.
"The politico-economic link between public transport and road pricing: An ex-ante study of the Stockholm road-pricing trial,"
Elsevier, vol. 13(2), pages 162-172, March.
- Hutlkrantz, Lars & Armelius, Hanna, 2005. "The Politico-Economic Link Between Public Transport And Road Pricing: An Ex-Ante Study Of The Stockholm Road-Pricing Trial," Working Papers 2005:8, Örebro University, School of Business.
When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:46:y:2012:i:6:p:926-937. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.