Testing for Offsetting Behavior and Adverse Recruitment Among Drivers of Airbag-Equipped Vehicles

Earlier studies reported that an insurance industry index of personal‐injury claims rose after automobiles adopted driver's side airbags and that drivers of airbag‐equipped vehicles were more likely to be at fault in fatal multivehicle accidents. These findings can be explained by the offsetting behavior hypothesis or by at‐risk drivers systematically selecting vehicles with airbags (i.e., adverse recruitment). We test for offsetting behavior and adverse recruitment after airbag adoption using a database containing information on fatal accidents including information on drivers' previous records and drivers' actions that contributed to the occurrence of the accident. Further, we reexamine the personal injury claims index data for newly airbag‐equipped vehicles and show that the rise in the index after airbag adoption may be attributable to moral hazard and a new vehicle ownership pattern. Rental car drivers are much more likely to commit grievous acts than other drivers, and the proportion of new automobiles in daily rental service more than doubled during the period of airbag adoption.     

Economic news as a consumer product: An analysis of the effects of alternative media sources on the formation of consumer economic expectations

This study reports the results of a behavioral experiment in which 120 subjects were exposed to different media reports of the same monthly Bureau of Labor Statistics' unemployment reports. After reading the news stories, as reported by the CBS Evening News, The Wall Street Journal, and the Washington Post, the subjects were asked similar questions to those used in the University of Michigan's Survey on Consumer Sentiments. The results of the study suggest that consumer confidence may be sensitive to the selection of media source.

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Zusammenfassung Der Beitrag berichtet über eine Untersuchung individueller Unterschiede bei wirtschaftlichen Erwartungen, die nicht durch unterschiedliche wirtschaftliche Nachrichten, sondern — bei gleichlautenden Nachrichten — durch unterschiedliche Medien, über die sie vermittelt werden, hervorgerufen werden.Die Nachrichten entstammten den monatlichen Arbeitslosenberichten der amtlichen Beschäftigungsstatistik. Insgesamt 36 Nachrichtentexte der CBS Evening News, des Wall Street Journal und der Washington Post wurden für die Untersuchung so überarbeitet, daß die konkrete Quelle und der tatsächliche Zeitraum, auf den sich die Nachricht jeweils bezog, nicht mehr erkannt werden konnte. Die so bereinigten Nachrichten wurden 120 Versuchspersonen (Studenten) zum Lesen vorgelegt. Anschließend wurden ihnen Fragen zur Erhebung wirtschaftlicher Erwartungen vorgelegt.Die Ergebnisse machen deutlich, daß Unterschiede im Vertrauen auf die zukünftige wirtschaftliche Entwicklung bei gleichen inhaltlichen Nachrichten auf Unterschiede in den Nachrichtenmedien zurückgeführt werden können. Personen, die sich mehr auf Zeitungsinformationen stützten, kamen im Vergleich zu solchen, die sich eher auf das Fernsehen stützten, zu signifikant höheren Werten auf der Vertrauensskala. Dieses Ergebnis dürfte allerdings insofern verzerrt sein, als die bildliche Komponente einer Nachricht in der Untersuchung nicht berücksichtigt wurde.

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Stephen W. Pruitt is Assistant Professor in the Graduate School of Business, Indiana University, Bloomington, IN 47405, USA. George E. Hoffer is Professor in the Department of Economics, School of Business, Virginia Commonwealth University, Box 4000, Richmond, VA 23284-4000, USA.The authors are grateful to the Faculty Grant-In-Aid Program at Virginia Commonwealth University for funding.     

The United States International Air Route Award Process: Shareholder Wealth Effects and Policy Implications

This study empirically investigates the market pricing dynamics of United States airline stocks in response to United States government allocations of exclusive, zero-priced international air route awards from the 1963 to 1993 time period. A $900 filing fee required by the Department of Transportation represents the only explicit monetary cost associated with the award of an international air route. This low fee suggests that the current award system subsidizes United States airlines by transferring valuable public property rights to private ownership and control for paltry explicit fees. The performed dollar abnormal tests suggest that the 82 analyzed international air routes have enriched airline shareholders by about $3.5 billion.     

The efficiency of used vehicle markets: the case of technological obsolescence and differential repair records

This paper examines the effect of technological oboslescence, differential maintanance expenditures, and differential fuel efficiencies on the depreciated value of automobiles. Our results support the widely held belief that used vehicle markets are efficient. We show that the significant decline in the depreciated values of used automobiles is predominantly due to age. We also conclude that technological obsolescence causes a once-and-for-all decrease in the depreciated value of used automobiles, that for imported vehicle lines, differential maintanance expenditures affect depreciated value and, that for domestic vehicle lines, differential fuel efficiencies impact depreciated value.     

AUTOMOTIVE RECALLS AND INFORMATIONAL EFFICIENCY

This study provides an empirical test of the informational efficiency of the stock market by exploring the stock price and volume patterns exhibited by Chrysler, Ford, and General Motors around the time of announcement of severe automotive recall campaigns. Because information concerning automotive recalls is released to the public via two distinct methods, which differ only with respect to the number of market participants notified of the recall campaigns, a differential performance analysis of stock returns and trading volume around both events provides evidence of the degree of informational aggregation in the stock market for three closely followed U.S. firms. The results of the study fail to support the definitional notion of informational efficiency with respect to the first public release date of severe recalls, as the vast majority of the stock market's response to recall announcements does not occur until the information is reported to all market participants. Further, tests of differential trading volume around the announcements suggest that some members of the financial community may be trading securities on the basis of the information contained in the first public announcement.     

Market responses to publicly-provided information: the case of automative safety

Over the last 25 years the federal government has become increasingly involved in the provision of information on automobile quality and safety. Its release of National Highway Traffic Safety Administration data on occupant crash survivablity is a prominent example. This paper examines the impact of the agency's crash test results on the sales growth of tested automobile lines. Finding no impact, the crash data is then compared to privately collected insurance industry data on actual bodily injury claims by car line. these data sets show little consistency. based on these findings, we conclude that consumers's apparent disregard of government crash test data may well be rational.