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Unformatted text preview: Strict Liability will not work, moral hazard, Injurer will behave below X* Negligence rule may or may not work, depends on the specific costs At this point, nothing in our specific tort rules will make the Injurer behave efficiently Solution : Legislative! o The judgment proof defendant will o Can we criminalize? Create a non-monetary penalty for the Injurer. o What if you HAVE to indemnify yourself? The idea behind mandatory insurance Critics: o Say Insurance itself creates a moral hazard o Insurance solution: Deductible Forces individual to NOTICE the risk involved Experience rating: Insurance prices the policy depending on your level of risk to them Experience rating insurance: Insurance companies behave like a court: o If you are a certain level of careful, on average, damages are low....
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- Spring '08