LoJack hid its anti-theft device to cut citywide theft

Traditional car alarms and anti-theft devices are visible on purpose: a flashing light, a steering-wheel lock, a window sticker, all designed to make a would-be thief pick a different, unprotected car instead. That approach protects the individual owner but does nothing for the fleet of cars around it, since the deterrent simply displaces theft onto a neighbor's vehicle rather than reducing it overall.

William Reagan, a former Massachusetts police official, patented a different design in 1979 and founded LoJack Corporation in Medfield, Massachusetts in 1986: a radio transceiver hidden inside the vehicle, invisible from outside and silent unless the car is reported stolen, at which point police cruisers with tracking computers pick up its signal and follow it directly to the car.

Because a LoJack unit gives no external sign of its presence — no sticker, no visible hardware — a thief stealing any given car in a LoJack market can never know in advance whether that specific car will lead police straight back to wherever it's taken, including chop shops and theft rings. Economists Ian Ayres and Steven Levitt's 1998 study of the technology found this invisibility was the mechanism, not a side effect: an unobservable device can't just displace crime onto other cars, so its deterrent effect spreads across the whole market instead of concentrating on the one car wearing it.

Removed every external sign of the device so a thief could never rule out any car, spreading the deterrent across the whole market.

Invisibility prevents thieves from selecting against equipped cars.

Every car becomes a risk, so theft drops market-wide.

Buyers capture little benefit, so the good is undersupplied.

Hidden controls deter across a population; visible ones only protect the tagged item.

Ayres and Levitt's analysis found that a LoJack buyer/insurer captured less than 10% of the total social benefit their purchase generated, with the rest accruing to everyone else's cars in the same city as auto theft, chop-shop activity and related crime fell; the paper estimated marginal social benefits running as high as 15 times marginal cost in high-theft areas, evidence of a private good that was being drastically undersupplied by the market precisely because most of its value wasn't capturable by the person paying for it.