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Public Regulation of Private Accident Risk: The Moral Hazard of Technological Improvements

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  • Risa, Alf Erling

Abstract

This paper discusses individual agents' incentives to take precautions to prevent accidents when the prevention technology facing the agents is changed due to regulation. It is shown that private prevention activities vary greatly with different attitudes towards risk. This is a great potential problem for the implementation of several types of legal regulation of individuals' precautionary level, like negligence rules. In this case, regulators need to observe the true preferences of the regulated agents to implement the optimal program. One novel feature of the present analysis is that only simple properties of the prevention technology need to be known to identify potential incentive problems, regardless of the underlying preferences. Copyright 1992 by Kluwer Academic Publishers

Suggested Citation

  • Risa, Alf Erling, 1992. "Public Regulation of Private Accident Risk: The Moral Hazard of Technological Improvements," Journal of Regulatory Economics, Springer, vol. 4(4), pages 335-346, December.
    • Handle: RePEc:kap:regeco:v:4:y:1992:i:4:p:335-46
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    Cited by:

    1. Bardal, Kjersti Granås & Jørgensen, Finn, 2017. "Valuing the risk and social costs of road traffic accidents – Seasonal variation and the significance of delay costs," Transport Policy, Elsevier, vol. 57(C), pages 10-19.
    2. Thomas Traynor, 2003. "The impact of safety regulations on externalities," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 31(1), pages 62-70, March.
    3. Pål Andreas Pedersen, 2001. "A Game Theoretical Approach to Road Safety," Studies in Economics 0105, School of Economics, University of Kent.
    4. Hoy, Michael & Polborn, Mattias K., 2015. "The value of technology improvements in games with externalities: A fresh look at offsetting behavior," Journal of Public Economics, Elsevier, vol. 131(C), pages 12-20.
    5. Russell S. Sobel & Todd M. Nesbit, 2007. "Automobile Safety Regulation and the Incentive to Drive Recklessly: Evidence from NASCAR," Southern Economic Journal, John Wiley & Sons, vol. 74(1), pages 71-84, July.
    6. Adam Pope & Robert Tollison, 2010. "“Rubbin’ is racin''': evidence of the Peltzman effect from NASCAR," Public Choice, Springer, vol. 142(3), pages 507-513, March.

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