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Law and Economics-Charles W. Upton Levels of Activity
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Tie Breakers Levels of Activity Errors in Application
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Levels of Activity Whenever I take a drive there is a chance of an accident.
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Levels of Activity Whenever I take a drive there is a chance of an accident. –A benefit cost calculation of that trip should consider that. –If we establish a rule than any other driver pays for injury to me, I do not have to consider that.
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Levels of Activity A Better Model A better model might be one in which I allow for the benefits of N trips less the cost of damages.
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Levels of Activity A Better Model A better model might be one in which I allow for the benefits of N trips less the cost of damages. B(N) - N [ p(x i,x v )D –wx v ] -wx i
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Levels of Activity Implications Suppose I am a careful driver. On each trip, I stay within the speed limit and observe reasonable precautions. That is I set x v = x v *. Under any defense of negligence, I escape all responsibility for any accidents.
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Levels of Activity Implications My private objective function becomes B(N) - Nwx v * The marginal benefits of a trip are B’(N) - wx v *
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Levels of Activity Implications Assuming optimal behavior by myself and the injurer, the social benefit of a trip is B’(N) -p(x i *,x v *)D -wx v *
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Levels of Activity Implications Assuming optimal behavior by myself and the injurer, the social benefit of a trip is B’(N) -p(x i *,x v *)D -wx v * Not B’(N) - wx v *
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Levels of Activity Implications Assuming optimal behavior by myself and the injurer, the social benefit of a trip is B’(N) -p(x i *,x v *)D -wx v * Not B’(N) - wx v * I do not consider the full cost of the social trip. I overstate the benefits.
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Levels of Activity A Summary
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Levels of Activity No Liability
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Levels of Activity No Liability
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Levels of Activity Strict Liability
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Levels of Activity Strict Liability
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Levels of Activity Simple Negligence
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Levels of Activity Simple Negligence Problem
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Levels of Activity Simple Negligence Problem
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Levels of Activity Negligence + Contributory Negligence
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Levels of Activity Negligence + Contributory Negligence Problem
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Levels of Activity Negligence + Contributory Negligence Problem
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Levels of Activity Strict Liability + Contributory Negligence
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Levels of Activity Strict Liability + Contributory Negligence Problem
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Levels of Activity Strict Liability + Contributory Negligence
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Levels of Activity Comparative Negligence
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Levels of Activity Comparative Negligence
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Levels of Activity Comparative Negligence Problem
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Levels of Activity And the Winner Is…
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Levels of Activity And the Winner Is… If you want to give incentives to the injurer to change the level of activity: Strict Liability Plus Contributory Negligence
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Levels of Activity And the Winner Is… If you want to give incentives to the injurer to change the level of activity: Strict Liability Plus Contributory Negligence If you want to give incentives to the victim to change the level of activity: Comparative Negligence
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Levels of Activity End ©2004 Charles W. Upton
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