THE PRICE OF SAFETY

This article presents a simple economic model to assess consumers' val uation of safety features. In particular, we model the benefit from sa fety as the reduction in the probability of death, and the associated economic value of this reduction. We then apply this theoretical model to investigate market valuation of antilock brakes and airbags via th e specification and estimation of a hedonic price equation. Results in dicate that consumers behave in a manner consistent with the economic model we develop.