Public Regulation of Private Accident Risk: The Moral Hazard of Technological Improvements
AbstractThis 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
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 4 (1992)
Issue (Month): 4 (December)
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- Pål Andreas Pedersen, 2001. "A Game Theoretical Approach to Road Safety," Studies in Economics 0105, Department of Economics, University of Kent.
- 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.
- Michael Hoy & Mattias Polborn, 2014. "The Value of Technology Improvements in Games with Externalities: A Fresh Look at Offsetting Behavior," CESifo Working Paper Series 4798, CESifo Group Munich.
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