Improving vehicle safety using a market-based methodology

A new, market-oriented methodology is proposed to improve vehicle safety. The aim is to recognise r that vehicle design decisions are a component of accident costs and that in this sense, these decisions generate an external cost or benefit to the community. In order to internalise this cost it is proposed to charge a fee to those manufacturers whose vehicles show accident rates above the average for the industry (negative externality). The fee will be charged per vehicle sold and the earnings will be used to pay a subsidy to the manufacturers who provide vehicles that perform better than the average in accident rates (positive externality). This will create an additional market incentive to build safer cars. The average rate of accidents is used as a yardstick to exclude contributory factors that are not under the control of the manufacturer, for example, black spots. The introduction of a new safety feature will be reflected as additional income for the manufacturer, and will speed-up the introduction of additional safety features in vehicles, such as pedestrian protection, which can be justified in terms of the cost/benefits ratio to the company. In fact, the assigned cost of accidents, together with the expected reduction in accidents, compared with the cost of a new safety feature, will be the commanding arguments within manufacturers when the introduction of a safety feature is being considered. (A)