Cost‐Benefit Analysis of All‐Terrain Vehicles at the CPSC¹

The present value of the costs of injuries and deaths associated with each unit of a product is a useful number in conducting cost‐benefit analysis at the CPSC. Before a remedy is known, this value indicates the approximate amount that it is worth spending on a fix; similarly, if a fix is proposed, this number indicates whether it is cost‐justified. The method of analysis is applied to all‐terrain vehicles. Injury costs per vehicle are estimated. Determinants of accidents are estimated using a logit regression model applied to surveys of users and of accident victims; this indicates factors associated with accidents, and is used to estimate marginal probabilities. Costs of various vehicle components are estimated using a hedonic price index. This information (injury costs, accident probabilities, and component cost) is combined in a benefit–cost analysis of proposed remedies.