Valuation and pricing of traffic safety

Abstract: This thesis consists of six essays covering the topic of valuation and pricing of accidents. In the first essay a theory of the external marginal cost of accidents is presented. The external cost is dependent on the value of statistical life, the proportion internal cost and the so called risk elasticity, i.e. the relationship between traffic flow and accident risk. The two following essays present CV-studies on value of statistical life. Both CV-studies are based on the community approach built on the Swedish Vision Zero and ask respondents about their willingness-to-pay for absolute safety from fatal and severe accidents in one city. The first study focuses on the problem of scope and hypothetical bias and shows that ex post calibration based on respondents’ certainty in answering the WTP question reduces the willingness-to-pay with up to 30% for a public good. Based on these certain responses a lower bound VSL value is presented of SEK 53 million for a private good and 20 million for a public good. The second essay discusses the topic of nonselfish preferences and willingness-to-pay for children’s safety as well as for relatives and friends. The essay suggests that WTP for children safety is higher than private safety and that a WTP for the safety of relatives and friends is prevailing. Also this essay shows a big difference between the WTP for a private good and for a public good. The two following essays estimate the risk elasticity for railway level crossing accidents as well as for heavy goods vehicles in Sweden. Both essays find that the risk decreases with increased traffic i.e. negative risk elasticity. The last essay presents the result from a field experiment with speed related charges and bonuses. The experiment shows that internalisation of the external accident cost through speed related economic incentives strongly will affect drivers choice of speed. It is proposed that this can be achieved on a voluntary basis.

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