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B54a-compensating differentials

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B54A - Compensating Differentials

Given

  • U.S. Trucking pays its drivers $40,000 per year, while American Trucking pays its drivers $38,000 per year.
  • For both firms, truck drivers average 240,000 miles per year.
  • Truck driving jobs are the same regardless of which firm one works for, except that U.S.
  • Trucking gives each of its trucks a safety inspection every 50,000 miles while American Trucking gives each of its trucks a safety inspection every 36,000 miles.
  • This difference in safety inspection rates results in a different rate of fatal accidents between the two companies.
  • In particular, one driver for U.S Trucking dies in an accident every 24 million miles while one driver for American Trucking dies in an accident every 30 million miles.

Question:

What is the value of a trucker's life implied by the compensating differential between the two firms?

 

Reference no: EM132667750

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