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Defining Efficient Care: The Role of Income Distribution

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Author Info

  • Miceli, Thomas J
  • Segerson, Kathleen

Abstract

This article examines whether the wealth levels of injurers and victims in accident cases are relevant for the determination of efficient tort rules. When the standard of efficiency is wealth maximization, it is well known that the answer is no. In this article, we consider whether this is also true when utility is not linear in wealth. We show that when actuarially fair insurance is available and income can be redistributed by mechanisms other than tort liability, efficient care levels and damage awards are independent of wealth in this case as well. When independent redistribution mechanisms do not exist, however, then whether wealth matters depends on the assumed distribution of accident costs in the definition of efficient care. These conclusions have important implications regarding the admissibility of evidence regarding a defendant's wealth in tort cases. Copyright 1995 by the University of Chicago.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Legal Studies.

Volume (Year): 24 (1995)
Issue (Month): 1 (January)
Pages: 189-208

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Handle: RePEc:ucp:jlstud:v:24:y:1995:i:1:p:189-208

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Web page: http://www.journals.uchicago.edu/JLS/

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Cited by:
  1. Segerson, Kathleen, 1998. "Mandatory vs. Voluntary Approaches to Food Safety," Research Reports 25188, University of Connecticut, Food Marketing Policy Center.
  2. Tim Friehe, 2007. "A note on judgment proofness and risk aversion," European Journal of Law and Economics, Springer, vol. 24(2), pages 109-118, October.
  3. Dan Usher, 1999. "Personal Goods, Efficiency and the Law," Working Papers 985, Queen's University, Department of Economics.
  4. Giuseppe Dari-Mattiacci & Eric Langlais, 2008. "Social Wealth and Optimal Care," EconomiX Working Papers 2008-34, University of Paris West - Nanterre la Défense, EconomiX.
  5. Barrett, James P. & Segerson, Kathleen, 1995. "Prevention And Treatment In Food Safety: An Analysis Of Conceptual Issues," Proceedings: The Economics of Reducing Health Risk from Food, June 6-7, 1995, Washington, D.C. 25956, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
  6. Roe, Brian E., 1999. "Preventable Food Borne Illness With Dose-Response Damages: Optimal Sharing Of Prevention Between Consumers And Processors And The Effect Of Product Liability," 1999 Annual meeting, August 8-11, Nashville, TN 21668, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Langlais, Eric, 2010. "Safety and the Allocation of Costs in Large Accidents," MPRA Paper 25710, University Library of Munich, Germany.
  8. De Geest, Gerrit, 2013. "N problems require N instruments," International Review of Law and Economics, Elsevier, vol. 35(C), pages 42-57.
  9. Barrett, James & Segerson, Kathleen, 1997. "Prevention and Treatment in Environmental Policy Design," Journal of Environmental Economics and Management, Elsevier, vol. 33(2), pages 196-213, June.
  10. Nell, Martin & Richter, Andreas, 2001. "The design of liability rules for highly risky activities: Is strict liability the better solution?," Working Papers on Risk and Insurance 1, University of Hamburg, Institute for Risk and Insurance.
  11. Marc D. Davidson, 2012. "Intergenerational Justice: How Reasonable Man Discounts Climate Damage," Sustainability, MDPI, Open Access Journal, vol. 4(1), pages 106-122, January.
  12. Hackney, James Jr., 2003. "Law and neoclassical economics theory: a critical history of the distribution/efficiency debate," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(4), pages 361-390, September.
  13. Juan José Ganuza & Fernando Gómez, 2003. "Optimal negligence rule under limited liability," Economics Working Papers 759, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2004.
  14. Zivin, Joshua Graff & Just, Richard E. & Zilberman, David, 2005. "Risk Aversion, Liability Rules, and Safety," International Review of Law and Economics, Elsevier, vol. 25(4), pages 604-623, December.
  15. Kathleen Segerson, 1999. "Mandatory versus voluntary approaches to food safety," Agribusiness, John Wiley & Sons, Ltd., vol. 15(1), pages 53-70.
  16. Ganuza Juan-Jose & Gomez Fernando, 2006. "Caution, Children Crossing: Heterogeneity of Victim's Cost of Care and the Negligence Rule," Review of Law & Economics, De Gruyter, vol. 1(3), pages 365-397, January.

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