Least-Cost Avoidance: The Tragedy of Common Safety
AbstractThis article shows that the least-cost avoider approach in tort is not necessarily the optimal way to attain least-cost avoidance when accidents can be avoided by either of two parties. When parties do not observe each other's costs of care at the time of the accident and are unable to determine which party is the least-cost avoider, they fail to anticipate the outcome of the adjudication. Under these circumstances, accident avoidance becomes a commons problem because care by each individual party reduces the prospect of liability for both parties. As a result, parties suboptimally invest in care. We show that regulation removes this problem and is superior to tort liability both when parties act simultaneously and when they act sequentially. We further examine how different liability rules perform in this respect. (JEL K13, K32) The Author 2007. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: firstname.lastname@example.org, Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal The Journal of Law, Economics, & Organization.
Volume (Year): 25 (2009)
Issue (Month): 1 (May)
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Find related papers by JEL classification:
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
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