Integrating Accident and Travel Delay Externalities in an Urban Speed Reduction Context

Accident externality costs remain controversial in terms of their costing and valuation. Much of the literature on accident and travel delay externalities treats each source as mutually exclusive and additive, yet common sense suggests that interdependencies prevail. One example of this is the recognition that accident externalities are not independent of travel delays, and hence travel time savings and losses are influenced by policy designed to reduce the risk of exposure to accidents. Reduced maximum speed limit restrictions also add costs in terms of loss of travel time (and increased speed limits produce travel time benefits). Also, lowered speed limits may lead to more drivers risking exceeding the speed limit because of perceived time loss, thereby exacerbating the potential for accidents. The paper takes a close look at the empirical relationship between accident and travel delay externalities in an urban setting, accounting for the risk‐compensating behaviour under conditions of greater accident risk. Recognizing that levels of risk in an urban setting are broadly a function of traffic densities and that the latter can be approximated by the mix of free flow and non‐free flow travel time (for a given total travel time), an aggregate marginal externality cost function is used to quantify empirically the input elements in the context of a driver’s choice between a free and a tolled route in Sydney, Australia. This discrete choice context is sufficient, given an externally established relationship between speed and traffic density, to quantify the marginal externality accident and travel time delay costs. It is shown what additional externality has to be factored into the accident costs to recognize the other sources of externality typically ignored in accident costing and speed restriction studies.