Varying Injurer Costs of Care, Negligence, and Self-Selection
AbstractStandard economic models of negligence set a single standard of care to which all injurers must conform. When injurers differ in their costs of care, this leads to distortions in individual care choices. This paper derives the characteristics of a negligence rule that induces optimal care by all injurers by means of self-selection. The principal features of the rule are (1) the due standard is set at the optimal care of the lowest cost injurer, and (2) liability increases gradually rather than abruptly as care falls below this standard. The results are consistent with the gradation in liability under certain causation rules and under comparative negligence.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2003-11.
Length: 20 pages
Date of creation: Mar 2003
Date of revision:
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- Russell Cooper, 1984. "On Allocative Distortions in Problems of Self-Selection," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 568-577, Winter.
- Kahan, Marcel, 1989. "Causation and Incentives to Take Care under the Negligence Rule," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 427-47, June.
- Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
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