ECO320Y5 Study Guide - Midterm Guide: Subrogation, Social Cost, Opportunity Cost
Document Summary
Tutorial 7 - monday, november 11, 2019 - tort and crime. Be sure to review your answer in light of the section below about litigation costs and their effect on the efficiency of the tort liability system. In principle, the accident victim could recover twice once from the insurance company and once from the injurer. In effect, insurance is a private system of liability law that reallocates the costs of accidents according to contracts between insurer and insured. As this private system becomes more complete, injurers and victims deal directly with their insurance companies, not with each other. In these circumstances, people care more about insurance rates and terms of coverage, and they care less about the underlying law of accidents. Use the economic theory of bargaining to characterize the torts in which the transaction costs of settling disputes are likely to be large.
