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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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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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  1. Jones-Lee, Michael W, 1974. "The Value of Changes in the Probability of Death or Injury," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 835-49, July/Aug.. [Downloadable!] (restricted)
  2. Steven Shavell, 1980. "Strict Liability Versus Negligence," NBER Reprints 0084, National Bureau of Economic Research, Inc.
  3. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug.. [Downloadable!] (restricted)
  4. Cook, Philip J & Graham, Daniel A, 1977. "The Demand for Insurance and Protection: The Case of Irreplaceable Commodities," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 143-56, February. [Downloadable!] (restricted)
  5. Chateauneuf, Alain & Dana, Rose-Anne & Tallon, Jean-Marc, 2000. "Optimal risk-sharing rules and equilibria with Choquet-expected-utility," Journal of Mathematical Economics, Elsevier, vol. 34(2), pages 191-214, October. [Downloadable!] (restricted)
  6. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March. [Downloadable!] (restricted)
  7. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-74, June. [Downloadable!] (restricted)
  8. Steven Shavell, 1982. "On Liability and Insurance," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 120-132, Spring. [Downloadable!] (restricted)
  9. Kaplow, Louis & Shavell, Steven, 1994. "Why the Legal System Is Less Efficient Than the Income Tax in Redistributing Income," Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 667-81, June.
  10. Kaplow, Louis & Shavell, Steven, 2000. "Should Legal Rules Favor the Poor? Clarifying the Role of Legal Rules and the Income Tax in Redistributing Income," Journal of Legal Studies, University of Chicago Press, vol. 29(2), pages 821-35, June.
  11. Joshua Graff Zivin & Richard Just & David Zilberman, 2003. "Risk Aversion, Liability Rules, and Safety," NBER Working Papers 9678, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. 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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