This case study compares benefit/cost analysis and cost effectiveness analysis on the same information about highway lighting and its role in accident reduction. Poor highway lighting may be one reason that proportionately more traffic accidents occur at night. Traffic accidents are categorized into six types by severity and value. For example, an accident with a fatality is valued at approximately $4 million, while an accident in which there is property damage (to the car and contents) is valued at $6000. One method by which the impact of lighting is measured compares day and night accident rates for lighted and unlighted highway sections with similar characteristics. Observed reductions in accidents seemingly caused by too low lighting can be translated into either monetary estimates of the benefits B of lighting or used as the effectiveness measure E of lighting.

This can serve as a base ratio for comparison when an incremental CEA is performed for additional accident reduction proposals. These preliminary B/C and C/E analyses prompted the development of four lighting options:
(W) Implement the plan as detailed above; light poles every 67 meters at a cost of $3500 per pole.
(X) Install poles at twice the distance apart (134 meters). This is estimated to cause the accident prevention benefit to decrease by 40%.
(Y) Install cheaper poles and surrounding safety guards, plus slightly lowered lumen bulbs (350 watts) at a cost of $2500 per pole; place the poles 67 meters apart. This is estimated to reduce the benefit by 25%.
(Z) Install cheaper equipment for $2500 per pole with 350-watt light bulbs and place them 134 meters apart.
This plan is estimated to reduce the accident prevention measure by 50% from 247 to 124.

Determine if a definitive decision on lighting can be determined by doing the following:
1. Use a benefit/cost analysis to compare the four alternatives to determine if any are economically justified.
2. Use a cost-effectiveness analysis to compare the four alternatives.
From an understanding viewpoint, consider the following:
3. How many property-damage accidents could be prevented on the unlighted portion if it were lighted?
4. What would the lighted, night-to-day accident ratio have to be to make alternative Z economically justified by the B/Cratio?

Number of Accidents Recorded Unlighted Day Night 379 199 Lighted Day Night 2069 839 Accident Type Property damage