4/17/2005

4-17-05 - 7

4-17-05

What's the EV of buying a radar detector? Let's say you have two choices - detector A costs $100 and will prevent 50% of tickets. Detector B costs $500 and will prevent 80% of tickets. Now consider the first case. Say you drive 80 mph in the 65 mph zones. With no detector, you will get an average of 1 ticket a year. The total cost of a ticket is $500 when you count how it affects your insurance rate. If you have no detector, your cost is $500/year. Lets say you buy a detector every 5 years. With detector A, your cost is $100/5+.5*$500 = $270 ; with detector B your cost is $500/5+.2*$500 = $200. The more expensive better detector is your best bet. What about not speeding? Let's say you just drive 65 mph instead and don't need a detector. If you drive 20,000 miles a year, you are spending 308 hours in the car instead of 250 hours, 58 more hours. At a life hour value of $100/hour, that costs you $5800 dollars, clearly a far worse choice. To do a proper analysis we need to include the chance of death or injury and how you value that. It's hard for me to find good numbers on that, but roughly at 65 mph your chance of death per year is 0.000147 ; at 80 mph it seems the chance of death increases greatly, perhaps by 1.5X. If you value your life at $10 million, the fatality cost at 65 mph is $1466 , and at 80 mph is $2199, so the slower choice is still not a good one.

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