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Social wealth and optimal care

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Author Info
Darri-Mattiacci, Giuseppe
Langlais, Eric

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Abstract

Many accidents result in losses that cannot be perfectly compensated by a monetary payment. Moreover, often injurers control the magnitude rather than the probability of accidents. We study the characteristics of optimal levels of care and distribution of risk under these circumstances and show that care depends on the aggregate wealth of society but does not depend on wealth distribution. We then examine whether ordinary liability rules, regulation, insurance, taxes and subsidies can be used to implement the first-best outcome. Finally, our results are discussed in the light of fairness considerations (second best).

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File URL: http://mpra.ub.uni-muenchen.de/9418/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9418.

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Date of creation: 27 Jun 2008
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Handle: RePEc:pra:mprapa:9418

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Related research
Keywords: accidents; risk; wealth; care; bodily injury.;

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Find related papers by JEL classification:
K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability

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  15. Nell, Martin & Richter, Andreas, 2003. "The design of liability rules for highly risky activities--Is strict liability superior when risk allocation matters?," International Review of Law and Economics, Elsevier, vol. 23(1), pages 31-47, March. [Downloadable!] (restricted)
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