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

Author

Listed:
  • Ganuza Juan-Jose

    (Universitat Pompeu Fabra, Barcelona)

  • Gomez Fernando

    (Universitat Pompeu Fabra, Barcelona)

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. We explore in particular detail the more interesting case of 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.

Suggested Citation

  • Ganuza Juan-Jose & Gomez Fernando, 2006. "Caution, Children Crossing: Heterogeneity of Victim's Cost of Care and the Negligence Rule," Review of Law & Economics, De Gruyter, vol. 1(3), pages 365-397, January.
  • Handle: RePEc:bpj:rlecon:v:1:y:2006:i:3:n:3
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    References listed on IDEAS

    as
    1. Miceli, Thomas J & Segerson, Kathleen, 1995. "Defining Efficient Care: The Role of Income Distribution," The Journal of Legal Studies, University of Chicago Press, vol. 24(1), pages 189-208, January.
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    7. repec:bla:joares:v:22:y:1984:i:1:p:1-20 is not listed on IDEAS
    8. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
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    10. Miceli, Thomas J., 1997. "Economics of the Law: Torts, Contracts, Property, Litigation," OUP Catalogue, Oxford University Press, number 9780195103908.
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