01:220:395 Lecture 5: Tort Powerpoint Notes
Document Summary
I"m not liable: determining standard of care, safety regulations, reasonable care (level of care a reasonable person would have taken, strict liability vs. negligence. A: cost of accident (to victim) p(x)a: expected cost of accidents. Economic goal of torts: reach an efficient level of precaution: bilateral precaution xinjurer, xvictim. This has the same solution as minxi { p(xi, xv)a + + wixi : no liability rule. Injurer"s private cost is just wx (minimized at x=0) Victim"s private cost is p(x)a + wx (minimized at efficient precaution level: no liability leads to efficient precaution by victims, no precaution by injurers. Liability rules create incentives for activity levels (amount we do each activity) as well as precaution: with no liability, injurer"s activity level is inefficiently high, strict liability. Injurer"s private cost is p(x)a + wx (minimized at efficient precaution level) Victim"s private cost is just wx (minimized at x=0) Strict liability leads to efficient precaution by injurers, no precaution by victims.
