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On Liability Insurance for Automobiles

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  • Flåm, Sjur Didrik
  • Wolfstetter, Elmar G.

Abstract

Car owners are liable for property damage inflicted on other motorists. In most countries such liability must be insured by law. That law may favor expensive or heavy vehicles, prone to suffer or inflict large losses. This paper explores links between liability rules and vehicle choice. It presumes cooperative insurance, but non-cooperative acquisition of vehicles. Thus, the Nash equilibrium and its degree of efficiency depend on the liability regime.

Suggested Citation

  • Flåm, Sjur Didrik & Wolfstetter, Elmar G., 2010. "On Liability Insurance for Automobiles," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 321, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:321
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    File URL: https://epub.ub.uni-muenchen.de/13233/1/321.pdf
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    References listed on IDEAS

    as
    1. Steven Shavell, 1982. "On Liability and Insurance," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 120-132, Spring.
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    More about this item

    Keywords

    liability; mutual insurance; core; pure Nash equilibrium; anonymous games; non-atomic measure;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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