ch33law and economics微观-范里安-(上海交通大学,赵旭 .ppt

Liability Law Both full liability and negligence rules are socially optimal, but full liability fully insures V always, and the negligence rule fully insures V only if IN’s care effort level . Victims prefer full liability; injurers prefer the negligence rule. Bilateral Accidents V and IN can each exert effort to avoid a loss. cV(xV) and cIN(xIN). Loss is L(xV,xIN). Society wishes to Bilateral Accidents Society wishes to Social optimality requires V’s MC of effort = MB of his effort IN’s MC of effort = MB of her effort. I.e. Bilateral Accidents No Liability: Both V and IN face only their private effort costs, not the full social costs of their actions. Bilateral Accidents No Liability: Both V and IN face only their private effort costs, not the full social costs of their actions. Hence V and IN both provide too little effort. No liability is socially suboptimal. Bilateral Accidents Full Liability: V is fully compensated for all injury costs. Bilateral Accidents Full Liability: V is fully compensated for all injury costs. Hence V chooses Full liability is socially suboptimal in bilateral accidents. Bilateral Accidents Strict Division of Losses: IN must pay a fixed fraction, f, of loss caused. IN minimizes IN chooses effort satisfying Bilateral Accidents IN chooses effort satisfying Optimality requires Since f 1, IN chooses less than the optimal effort level; Bilateral Accidents IN chooses effort satisfying Optimality requires Since f 1, IN chooses less than the optimal effort level; Strict division of losses is a socially suboptimal liability rule. Bilateral Accidents Negligence Rule: IN is fully liable for loss only if her effort level , a legally determined effort level. Social optimality requires V and IN to choose effort levels and , where and Bilateral Accidents Suppose V chooses Then IN is fully liable and wishes to I.e. IN chooses Bilateral Accidents Now suppose IN chooses Then V wishes to I.e. V