Pounds That Save: The Role of Preferences for Safety in Demand for Large Vehicles

Abstract

This paper provides novel evidence that consumers choose larger vehicles as an investment in their safety. I test for this purchasing behavior by isolating the quasi randomness of death in accidents involving at least one fatality. Leveraging this variation as a shock that made driving risk more salient to the victims’ acquaintances, I test whether consumers consequently infer a link between safety and vehicle weight. Using detailed information about household vehicle purchases and the locations of the purchasers’ residences, I demonstrate that households neighboring an individual who dies in an accident respond by purchasing significantly larger vehicles than comparable households neighboring someone who survives an accident. These findings capture strategic purchases of heavier vehicles for safety, behavior that can ultimately lead to the inefficiencies of a vehicle arms race.