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Social wealth and optimal care

Author

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  • Darri-Mattiacci, Giuseppe
  • Langlais, Eric

Abstract

Many accidents result in losses that cannot be perfectly compensated by a monetary payment. Moreover, often injurers control the magnitude rather than the probability of accidents. We study the characteristics of optimal levels of care and distribution of risk under these circumstances and show that care depends on the aggregate wealth of society but does not depend on wealth distribution. We then examine whether ordinary liability rules, regulation, insurance, taxes and subsidies can be used to implement the first-best outcome. Finally, our results are discussed in the light of fairness considerations (second best).

Suggested Citation

  • Darri-Mattiacci, Giuseppe & Langlais, Eric, 2008. "Social wealth and optimal care," MPRA Paper 9418, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:9418
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    References listed on IDEAS

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    More about this item

    Keywords

    accidents; risk; wealth; care; bodily injury;

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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