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OF DRIVING WITHOUT A LICENCE - page 5 / 14

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4

(4)

Q P P W P + = 1 2 0 0

aPd dp =

a 1d

[ d Q P + 1 0 ) (

d P 1 0

]

, d1

(5)

Q P P W P + = 2 4 0 0

bP λd

dp =

b 1 λd

[ d Q P λ + 1 0 ) (

d P λ 1 0

] , λd 1

in which (P0+Q) are usage costs when driving without a license. The value of Q is the sum of the perceived inconvenience of driving illegally (moral costs pr km), perceived expected penalty costs per km and perceived increase in expected accident costs per km for the car driver. All these factors are likely to vary significantly among drivers and consequently, so does the value of Q. From the above formulas it can be deduced that WP24 < 2WP12 when λ > 1 whilst WP24 = 2WP12 when λ = 1.

The situations described above are visualized in Figure 1. When the driver loses his

driving license, the number of km he drives, is reduced from

0 1 2 X

to

1 1 2 X

during 12

m o n t h s a n d f r o m 0 2 4 X t o 1 2 4 X d u r i n g 2 4 m o n t h s . F u r t h e r m o r e , t h e a r e a A d e n o t e s W P 1 2 and the (A + B) area denotes WP24.

P

X12

X24

(P0 + Q)

A

B

Q

P0

1 1 2 X 0 1 2 X 1 2 4 X 0 2 4 X

X12,X

24

Figure 1. A car driver’s demand for car usage for 12 months and 24 months.

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