A Structural Model of Safety and Safety Regulation in the Truckload Trucking Industry

This research models the effects of various public policies to improve safety within a structural model of the trucking industry.  The structural model describes how trucking firms choose their level of safety by balancing the cost of preventing crashes against the financial consequences of a crash.  This choice occurs within an interregional trade model that sets the market prices and quantities for the commodities that are transported between geographically dispersed markets.  After specifying the first-best, full-information equilibrium, the research models the effects of two common market failures.  The first is the myopic underestimation of crash costs by some trucking firms.  The second is a more general problem that some of the external costs of truck crashes (such as congestion at the crash site) cannot be legally recovered from trucking firms.  The research then investigates the choice of policies to protect other road users, and those who live along the highway, from these market failures.  The effects of the imposition of a minimum safety standard are compared with the consequences of either levying post-crash fines, or the charging of an ex-ante tax on the trucking industry.  The different policies are ranked on the basis of both their economic desirability, and the likelihood that they will be selected by voters in a political economy.