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Liability insurance under the negligence rule

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  • Marie-Cécile Fagart
  • Claude Fluet

Abstract

We incorporate the concept of evidentiary standard to the analysis of the negligence rule under liability insurance and court errors. When the postaccident evidence is privately contractible and not too noisy, efficiency is achieved by both strict liability and a negligence rule with appropriate due care and evidentiary standards. When the evidence is not directly contractible, trial outcomes represent useful contractible information for the risk-incentives tradeoff in the liability insurance policy. Strict liability is then inefficient and dominated by the negligence rule. The negligence rule can itself be improved upon by decoupling damages from the harm suffered by the victim. Copyright (c) 2009, RAND..

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Bibliographic Info

Article provided by RAND Corporation in its journal The RAND Journal of Economics.

Volume (Year): 40 (2009)
Issue (Month): 3 ()
Pages: 486-508

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Handle: RePEc:bla:randje:v:40:y:2009:i:3:p:486-508

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Cited by:
  1. Dionne, Georges & Michaud, Pierre-Carl & Pinquet, Jean, 2013. "A review of recent theoretical and empirical analyses of asymmetric information in road safety and automobile insurance," Research in Transportation Economics, Elsevier, Elsevier, vol. 43(1), pages 85-97.
  2. Donald J., Wright, 2011. "Medical malpractice and physician liability under a negligence rule," International Review of Law and Economics, Elsevier, Elsevier, vol. 31(3), pages 205-211, September.
  3. BOYER, Marcel & PORRINI, Donatella, 2010. "Optimal Liability Sharing and Court Errors : An Exploratory Analysis," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 05-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.

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