MEASURING POSITIVE EXTERNALITIES FROM UNOBSERVABLE VICTIM PRECAUTION - AN EMPIRICAL-ANALYSIS OF LOJACK

Lojack is a hidden radio-transmitter device used for retrieving stolen vehicles. Because there is no external indication that Lojack has bee n installed, it does not directly affect the likelihood that a protect ed car will be stolen. There may, however, be positive externalities d ue to general deterrence. We find that the availability of Lojack is a ssociated with a sharp fall in auto theft. Rates of other crime do not change appreciably. At least historically, the marginal social benefi t of an additional unit of Lojack has been fifteen times greater than the marginal social cost in high crime areas. Those who install Lojack , however, obtain less than 10 percent of the total social benefits, l eading to underprovision by the market.