A note on optimal care by wealth-constrained injurers
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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- 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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- Steven Shavell, 2003.
"Economic Analysis of Accident Law,"
NBER Working Papers
9483, National Bureau of Economic Research, Inc.
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