The Economics of Daytime Running Lights The use of Daytime Running Lights (DRLs) has increased in popularity with car designers throughout the world. In some countries, motorists are required to drive with their headlights on at all times. U.S. car manufacturers now offer models equipped with dayti

Question

The Economics of Daytime Running Lights

The use of Daytime Running Lights (DRLs) has increased in popularity with car designers throughout the world. In some countries, motorists are required to drive with their headlights on at all times. U.S. car manufacturers now offer models equipped with daytime running lights. Most people would agree that driving with the headlights on at night is cost effective with respect to extra fuel consumption and safety considerations (not to mention required by law!). Cost effective means that benefits outweigh (exceed) the costs. However, some consumers have questioned whether it is cost effective to drive with your headlights on during the day.

In an attempt to provide an answer to this question, let us consider the following suggested data:

[latex]75 \%[/latex] of driving takes place during the daytime.

[latex]2 \%[/latex] of fuel consumption is due to accessories (radio, headlights, etc.).

Cost of fuel [latex]=\$ 4.00[/latex] per gallon.

Average distance traveled per year [latex]=15,000[/latex] miles.

Average cost of an accident [latex]=\$ 2,800[/latex].

Purchase price of headlights [latex]=\$ 25.00[/latex] per set ( 2 headlights).

Average time car is in operation per year [latex]=350[/latex] hours.

Average life of a headlight [latex]=200[/latex] operating hours.

Average fuel consumption [latex]=1[/latex] gallon per 30 miles.

Let's analyze the cost effectiveness of driving with headlights on during the day by considering the following set of questions:

What are the extra costs associated with driving with headlights on during the day?
What are the benefits associated with driving with headlights on during the day?
What additional assumptions (if any) are needed to complete the analysis?
Is it cost effective to drive with headlights on during the day?

Accepted Answer

After some reflection on the above questions, you could reasonably contend that the extra costs of driving with headlights on during the day include increased fuel consumption and more frequent headlight replacement. Headlights increase visibility to other drivers on the road. Another possible benefit is the reduced chance of an accident.

Additional assumptions needed to consider during our analysis of the situation include:

the percentage of fuel consumption due to headlights alone and
how many accidents can be avoided per unit time.

Selecting the dollar as our common unit of measure, we can compute the extra cost associated with daytime use of headlights and compare it to the expected benefit (also measured in dollars). As previously determined, the extra costs include increased fuel consumption and more frequent headlight replacement.

Let’s develop an estimate of the annual fuel cost:

Annual fuel cost [latex]=(15,000 \mathrm{mi} / \mathrm{yr})(1 \mathrm{gal} / 30 \mathrm{mi})(\$ 4.00 / \mathrm{gal})=\$ 2,000 / \mathrm{yr}[/latex]

Assume (worst case) that [latex]2 \%[/latex] of fuel consumption is due to normal (night-time) use of headlights.

Fuel cost due to normal use of headlights [latex]=(\$ 2,000 / \mathrm{yr})(0.02)=\$ 40 / \mathrm{yr}[/latex].

Fuel cost due to continuous use of headlights [latex]=(4)(\$ 40 / \mathrm{yr})=\$ 160 / \mathrm{yr}[/latex].

Headlight cost for normal use [latex]=(0.25)\left(\frac{350 ext { hours } / \mathrm{yr}}{200 ext { hours/set }} ight)\left(\frac{\$ 25}{ ext { set }} ight)=\$ 10.94 / \mathrm{yr}[/latex].

Headlight cost for continuous use [latex]=\left(\frac{350 ext { hours } / \mathrm{yr}}{200 ext { hours } / \mathrm{set}} ight)\left(\frac{\$ 25}{\mathrm{set}} ight)=\$ 43.75 / \mathrm{yr}[/latex].

[latex]\begin{aligned} ext {Total cost associated with daytime use }&=(\$ 160-\$ 40)+(\$ 43.75-\$ 10.94)\ &=\$ 152.81 / \mathrm{yr}.\end{aligned}[/latex]

If driving with your headlights on during the day results in at least one accident being avoided during the next [latex](\$ 2,800) /(\$ 152.81)=18.3[/latex] years, then the continuous use of your headlights is cost effective. Although in the short term, you may be able to contend that the use of DRLs lead to increased fuel and replacement bulb costs, the benefits of increased personal safety and mitigation of possible accident costs in the long run more than offset the apparent short-term cost savings.

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