Law and Economics-Charles W. Upton A Model of Joint Action.

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Presentation transcript:

Law and Economics-Charles W. Upton A Model of Joint Action

We see that both victim and injurer must have incentives to avoid an accident. Hence we model their joint action.

A Model of Joint Action

Units of Accident Prevention by Victim Units of Accident Prevention by Injurer

A Model of Joint Action Cost per unit of Accident Prevention by Victim Cost per unit of Accident Prevention by Injurer

A Model of Joint Action Probability of an Accident

A Model of Joint Action Cost of an Accident

A Model of Joint Action Optimization

A Model of Joint Action Optimization The Cost of an Hour

A Model of Joint Action Optimization Decreased probability of an accident x the cost of an accident

A Model of Joint Action Optimization Spend time and money on accident prevention until the MC exactly equals the MB.

A Model of Joint Action The Problem Neither the rule of strict liability nor the rule of no liability gives both victim and injurer the incentive to avoid an accident

A Model of Joint Action Rule of no Liability Injurer’s Objective Function

A Model of Joint Action Rule of no Liability Injurer’s Objective Function The Right Solution

A Model of Joint Action Rule of no Liability Potential injurer has no incentives to be careful

A Model of Joint Action Rule of Strict Liability Victim’s Objective Function

A Model of Joint Action Rule of Strict Liability Victim’s Objective Function The Right Solution

A Model of Joint Action Rule of Strict Liability Potential victim has no incentives to be careful

A Model of Joint Action There is a Problem Fortunately there is a way around this difficulty. Negligence rules.

A Model of Joint Action End ©2004 Charles W. Upton

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