The economy of risk; or, what do I get for my error?

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Abstract
This paper starts from the assumption that the accident risk run by traffic participants is under their own voluntary control. It then considers the effects to be expected from incentives given to drivers for having fewer accidents or no accidents at all. On the basis of a simple utility model of drivers' preferred risk levels, expected safety effects are derived for incentive schemes which vary in: (1) the nature of the accident criterion to be met; (2) the extent of the criterion (i.e., the length of the period required); (3) the magnitude of the incentive; and (4) whether the criterion is an individual or a group performance. Implications of the results of cost effectiveness to the incentive provider are discussed. It appears that there is no lack of incentive schemes that are theoretically expected to yield more returns, in terms of accident costs, than needs to be invested in the incentive funds.