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Point-record incentives, asymmetric information and dynamic data (revised version)

  • Jean Pinquet

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS)

  • Georges Dionne

    (HEC Montréal - HEC MONTRÉAL)

  • Mathieu Maurice

    (HEC Montréal)

  • Charles Vanasse

    (TD Asset Management)

Road safety policies often use incentive mechanisms based on traffic violations to promote safe driving. These mechanisms are both monetary (fines, insurance premiums) and nonmonetary (point-record driving licenses). We analyze the effectiveness of these mechanisms in promoting safe driving. We derive their theoretical properties with respect to contract time and accumulated demerit points. These properties are then tested empirically in a model which separates moral hazard from unobserved heterogeneity. We do not reject the presence of moral hazard in the Quebec public insurance regime. Moreover, we verify that the experience rating introduced in 1992 did reduce the frequency of traffic violations by 15%. Lastly, we compare the effectiveness of the different incentive schemes and we derive monetary equivalents for traffic violations and license suspensions.

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Paper provided by HAL in its series Working Papers with number hal-00331180.

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Date of creation: Jul 2008
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Handle: RePEc:hal:wpaper:hal-00331180
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