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Point-record incentives, asymmetric information and dynamic data

Author

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  • Jean Pinquet

    (CECO - Laboratoire d'économétrie de l'École polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

  • Georges Dionne

    (HEC Montréal - HEC Montréal)

  • Charles Vanasse

    (TD Asset Management)

  • Mathieu Maurice

    (HEC Montréal - HEC Montréal)

Abstract

Road safety policies often use incentive mechanisms based on traffic violations to promote safe driving. These mechanisms are both monetary (fines, insurance premiums) and non-monetary (point-record driving licenses). We use Quebec data collected between 1983 and 1996 to analyze the efficiency of these mechanisms in reducing the effects of asymmetric information. We derive the theoretical properties of the incentive mechanisms with respect to contract time and accumulated demerit points. These properties are then tested empirically. We compare the overall efficiency of the different incentive schemes and try to link global results with the theoretical properties of the relation between safe driving effort and traffic violation risk. We do not reject the presence of moral hazard in the data. Moreover, the experience rating premium introduced in 1992 did reduce the frequency of traffic violations by 15%.

Suggested Citation

  • Jean Pinquet & Georges Dionne & Charles Vanasse & Mathieu Maurice, 2007. "Point-record incentives, asymmetric information and dynamic data," Working Papers hal-00243056, HAL.
    • Handle: RePEc:hal:wpaper:hal-00243056
    Note: View the original document on HAL open archive server: https://hal.science/hal-00243056
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    References listed on IDEAS

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    Cited by:

    1. Dionne, Georges & Dostie, Benoit, 2007. "Estimating the effect of a change in insurance pricing regime on accidents with endogenous mobility," Working Papers 07-6, HEC Montreal, Canada Research Chair in Risk Management.
    2. Marie‐Cécile Fagart & Claude Fluet, 2009. "Liability insurance under the negligence rule," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 486-508, September.
    3. Georges Dionne & Claude Fluet & Denise Desjardins, 2007. "Predicted risk perception and risk-taking behavior: The case of impaired driving," Journal of Risk and Uncertainty, Springer, vol. 35(3), pages 237-264, December.

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