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Measuring Positive Externalities From Unobservable Victim Precaution: An Empirical Analysis of Lojack

NCJ Number
The Quarterly Journal of Economics Volume: 1 Issue: 113 Dated: 1998 Pages: 43-77
Ian Ayres; Steven D. Levitt
Date Published
35 pages

This study examined the impact on the prevalence of auto theft of Lojack, a hidden radio-transmitter device installed in a vehicle that enables its tracking and retrieval if it is stolen. 


Because there is no external indication that Lojack has been installed in a vehicle, it does not directly affect the likelihood that a protected car will be stolen. There may, however, be positive externalities due to general deterrence. This study found that the availability of Lojack has been associated with a sharp fall in auto theft. Rates of other crime do not change appreciably. At least historically, the marginal social benefit of an additional unit of Lojack has been fifteen times greater than the marginal social cost in high crime areas. Those who install Lojack, however, obtain less than 10 percent of the total social benefits, leading to low consumer demand for Lojack. (publisher abstract modified)