DP13784 Effective policies and social norms in the presence of driverless cars: Theory and experiment

Author(s): Antonio Cabrales, Ryan Kendall, Angel Sánchez
Publication Date: June 2019
JEL(s): C90, D62, D63
Programme Areas: Labour Economics, Public Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13784

We consider a situation where driverless cars operate on the same roads as human-driven cars. What policies effectively discourage unsafe (fast) drivers in this mixed-agency environment? We develop a game theoretic model where driverless cars are the slowest and safest choice whereas faster driving speeds lead to higher potential payoffs but higher probabilities of accidents. Faster speeds also have a negative externality on the population. The model is used to create four experimental policy conditions. We findt hat the most effective policy is a mechanism where the level of punishment (to fast drivers) is determined endogenously within the driving population.