Cost-benefit analysis of incentive systems rewarding compliance with speed limits

Abstract

The paper presents a cost–benefit analysis of schemes rewarding drivers for not speeding. Three levels of the reward were defined: €20 per year, €300 per year, and €1,200 per year (corresponds to US$26, US$396, and US$1,586 at June 2013 exchange rate). It was estimated that these rewards would reduce the rate of speeding by 20%, 70%, and 95%, respectively. It was assumed that drivers would join a reward system voluntarily. Three groups of drivers were defined: one group, making up 50% of drivers, with an annual per driver accident rate 20% below the average for all drivers; a second group, 40% of drivers, with a per driver accident rate 10% below the average; and a third group, 10% of drivers, with a per driver accident rate 140% above average (i.e., a relative accident rate of 2.4). It was assumed that the safest drivers would be the first to join the program and that the least-safe drivers would be the last. Official Norwegian monetary valuations of the prevention of traffic fatalities and injuries were applied. The prevention of a fatality was valued at €3.46 million (2009 prices; equivalent to US$4.8 million in 2009). Benefits were found to be smaller than costs for all versions of the reward system and all groups of drivers except high-risk drivers in the system who were offered a €20 or €300 annual reward for not speeding.