Are consumers willing to pay a premium for self-driving cars?

New study reveals the market is split when it comes to autonomous technologies

By Dr. Ricardo Daziano

Transportation Research Part C: Emerging TechnologiesAutonomous vehicles use sensing and communication technologies to navigate safely and efficiently with little or no input from the driver; as someone who does not enjoy driving, this is of great interest to me – and many other people. But just how much are people willing to pay for the privilege of being driven around by the car?

Little analysis exists on the marketability of automated vehicles and we wanted to find out more about the demand, penetration and policy implications of autonomous vehicle technology.

Dr. Ricardo Daziano et alOur new study in Transportation Research Part C: Emerging Technologies reveals that not only are autonomous features highly desirable, but consumers are willing to pay a premium for them – almost $5,000 on top of a car with standard features.

The rise of the machines

Automation of personal transportation is becoming a reality at a faster pace than anticipated. When watching TV commercials for cars, it is easily noticeable that automated driver assistance technology is clearly highlighted; a driverless future is even emphasized in a couple of these commercials.

Autonomous vehicle technologies will create an unprecedented revolution in how people move. Today’s technology already allows a car to self-park and be on autopilot at low or high speeds on highways. Soon, cars will be able to navigate without a driver under a full range of conditions – including in the city, which is the most complex environment for automation, due to interactions with pedestrians and other vehicles, and traffic signals.

The adoption of automated navigation systems has the potential to dramatically reduce traffic congestion and accidents, while creating substantial improvements in the overall trip experience as well as providing enhanced accessibility opportunities to people with reduced mobility. To plan for and analyze the large impacts of automation, policymakers and car manufacturers need to understand the market; understanding consumer acceptance is critical for forecasting how the technologies will be adopted.

An economic measure of behavioral response is how consumers value driverless technology, which can be indicated by how much they’re willing to pay for automation. Our study is an initial attempt to quantify how households currently perceive and economically value automated vehicle technologies.

Valuing automation technologies

Since there are no established markets to observe people’s willingness to pay for automation, we collected experimental data that uses hypothetical scenarios. In a nationwide online panel, 1,260 people in the United States answered questions in a vehicle purchase experiment. We used an economic choice experiment, in which participants can see hypothetical vehicles described in terms of price and features, including automated navigation systems. In each choice scenario, we asked the respondent which car they would buy.

Using their responses, we estimated economic choice models that summarize people’s behavioral response to automation. Our analysis indicates that many people are willing to pay a significant amount for automation, even at this early stage of technology development: about $3,500 for partial automation (automated crash avoidance) and $4,900 for full automation.

However, we also found there was a large range in preferences for automation: while a significant proportion of people are willing to pay more than $10,000 for full automation technology, many are not willing to pay anything at all for the technology – at least not yet. Our models suggest that the demand for automation is split approximately evenly between high, modest and no demand, highlighting the importance of considering flexible preferences for emerging vehicle technologies.

Automation is overhauling how transportation is approached from a scientific perspective, because mobility may evolve to be completely different to how it is now. In fact, forecasting the sociotechnical transition to an automated transportation reality is a complex task that requires flexible mathematical models of human behavior as well as an understanding of the likely technology developments and possible business models that may emerge.

On the one hand, I feel particularly attracted to this interplay of economic modeling with technology innovation. On the other hand, I don’t enjoy driving so I look forward to cars that will drive (themselves) for me, and I would like to have an insider’s view of when this could happen.

Read the research

Are consumers willing to pay to let cars drive for them? Analyzing response to autonomous vehicles” in Transportation Research Part C: Emerging Technologies

About the author

Ricardo Daziano is a tenured associate professor of Civil and Environmental Engineering at Cornell University. He joined Cornell in 2011, right after finishing his PhD in Economics at UniversitĂ© Laval in QuĂ©bec City. Daziano’s primary research focus in on microeconometric decision modeling applied to technological innovation in transportation and energy efficiency. His work on discrete choice analysis and willingness to pay seeks to improve the feedback from demand dynamics to engineering and policy decisions for better transportation decision-making and planning. Daziano has been the recipient of several research grants and awards including a CAREER award from the National Science Foundation.

Ricardo Dazione