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Caution, Children Crossing: Heterogeneity of Victim's Cost of Care and Negligence Rule

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Author Info
Juan José Ganuza ()
Fernando Gómez

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Abstract

The paper deals with a bilateral accident situation in which victims have heterogeneous costs of care. With perfect information,efficient care by the injurer raises with the victim's cost. When the injurer cannot observe at all the victim's type, and this fact can be verified by Courts, first-best cannot be implemented with the use of a negligence rule based on the first-best levels of care. Second-best leads the injurer to intermediate care, and the two types of victims to choose the best response to it. This second-best solution can be easily implemented by a negligence rule with second-best as due care. We explore imperfect observation of the victim's type, characterizing the optimal solution and examining the different legal alternatives when Courts cannot verify the injurers' statements. Counterintuitively, we show that there is no difference at all between the use by Courts of a rule of complete trust and a rule of complete distrust towards the injurers' statements. We then relate the findings of the model to existing rules and doctrines in Common Law and Civil Law legal systems.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 666.

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Date of creation: Dec 2002
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Handle: RePEc:upf:upfgen:666

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Imperfect information; negligence rule; accidents; heterogeneous victims;

Find related papers by JEL classification:
K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Louis Kaplow & Steven Shavell, 1996. "Accuracy in the Assessment of Damages," NBER Working Papers 4287, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Sanchirico, Chris William, 2000. "Taxes versus Legal Rules as Instruments for Equity: A More Equitable View," Journal of Legal Studies, University of Chicago Press, vol. 29(2), pages 797-820, June.
  4. 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.
  5. 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.
  6. Arlen, Jennifer H, 1992. "Should Defendants' Wealth Matter?," Journal of Legal Studies, University of Chicago Press, vol. 21(2), pages 413-29, June.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Tim Friehe, 2007. "On the incentive effects of damage averaging in tort law," Economics Bulletin, Economics Bulletin, vol. 11(2), pages 1-7. [Downloadable!]
  2. Tim Friehe, 2008. "On judgment proofness in the case of bilateral harm," European Journal of Law and Economics, Springer, vol. 26(2), pages 175-185, October. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
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