A 40-mile stretch of rural road with limited access is used primarily by regional commuters and business travelers to move between two major interstate highways. The legal speed limit on the road is currently 55 miles per hour (mph) and the estimated average speed is 61 mph. Traffic engineers predict that if the speed limit were raised to 65 mph and enforcement levels were kept constant, the average speed would rise to 70 mph.
Currently, an average of 5,880 vehicles per day use the stretch of road -- approximately half are commuters and half are business travelers. Traffic engineers do not expect that a higher speed limit will attract more vehicles. Vehicles using the road carry, on average, 1.6 people. Traffic engineers predict that raising the speed limit on this stretch of road would result in an additional 52 vehicle crashes involving, on average, 0.1 fatalities annually. They also predict that operating costs would rise by an average of $0.002 per mile per vehicle.
The average hourly wage in the county in which the majority of users of the road work is $18.30/hour.
Estimate the annual net benefits of raising the speed limit on the road from 55 mph to 65 mph. In doing this, test the sensitivity of your estimate of annual net benefits to several alternative estimates of the value of time savings and the value of life that you have selected from the chapter.