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A note on optimal care by wealth-constrained injurers

  • Miceli, Thomas J.
  • Segerson, Kathleen

This paper clarifies the relationship between an injurer's wealth level and his care choice by highlighting the distinction between monetary and non-monetary care. When care is non-monetary, wealth-constrained injurers generally take less than optimal care, and care is increasing in their wealth level under both strict liability and negligence. In contrast, when care is monetary, injurers may take too much or too little care under strict liability, and care is not strictly increasing in injurer wealth. Under negligence, the relationship between injurer care and wealth is similar in the two formulations. However, when litigation costs are added to the model, the relationship between injurer care and wealth becomes non-monotonic under both liability rules.

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Article provided by Elsevier in its journal International Review of Law and Economics.

Volume (Year): 23 (2003)
Issue (Month): 3 (September)
Pages: 273-284

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Handle: RePEc:eee:irlaec:v:23:y:2003:i:3:p:273-284
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  1. Polinsky, A Mitchell & Rubinfeld, Daniel L, 1988. "The Welfare Implications of Costly Litigation for the Level of Liability," The Journal of Legal Studies, University of Chicago Press, vol. 17(1), pages 151-64, January.
  2. Ringleb, Al H & Wiggins, Steven N, 1990. "Liability and Large-Scale, Long-term Hazards," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 574-95, June.
  3. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
  4. Hylton, Keith N., 1990. "The influence of litigation costs on deterrence under strict liability and under negligence," International Review of Law and Economics, Elsevier, vol. 10(2), pages 161-171, September.
  5. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
  6. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
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