O see table 204 in book legal rule precaution

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o See table 204 in book
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Legal Rule Precaution Activity level or Unobservable precaution Moped(Victim) Truck(injurer) Moped Truck No liability Yes 0 Strict Liability 0 Simple Negligence Negligence+ contributory negligence Strict Liability+ contributory Negligence Comparative Negligence
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° Rule of no liability- victim bears all the costs of expected harm, p(x)A. ° Cost of victim under no liability- Cv=WvXv+P(Xv)A ° Cost min Wv=-P’(Xv)A ° efficient precaution X*, victim. ° ° Strict Liability Only have to prove harm and cause, not breach of duty. Victims Perspective o Injurer bears all costs of expected harm. o Cv=WvXv+P(Xv)a-P(Xv)D (this = 0) o Cv=WvXv Xv=0 o Victim has no incentive for precaution. Injurer’s Perspective o Ci=WXi+P(Xi)D o Remember D=A o Ci=WXi+P(Xi)A o Minimum Cost W=p’(x)*A o Injuree has incemtive for efficient precaution
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° If only the victim can take precaution then no liability is efficient ° If only the injure can take precaution then strict liability is efficient These are know as situation of unilateral precaution when only one party can take precaution Bilateral Precaution- both parties can take precaution o Strict liability and no loability is not efficient under bilateral. o SC=WvXv+WiXi+P(xv,Xi)A ° Negligence can give both parties incentives for efficient precaution. Needs harm, cause and breach of duty Breach of duty will require a standard of precaution. X˜= standard of precaution Let x˜=x* Injurer at fault if Xi<Xi* injurer liable Injure faultless if Xi_> X* injure not at fault ° ° 4/12/15 ° Review of Tort Theory 1) Harm 2) Cause 3) Breach of duty ° Under no liability and strict liability, breach of duty is ignored. °
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° Equation being used: SC-WX+P(X)A X=units of precaution W= Cost of a Unit of Production P(X)= probability of an accident A= cost of an accident D=damages assigned by the court o Under perfect competition D=A ° No Liability The Victims cost is: C v= W v X v +P(X v )A o Essentially MC=MB from the perspective of the victim Injurers Cost: C v= W i X i o Since X i =0 in this case, there is no cost. Moped Driver (Victim) has the incentive ° Strict Liability Injurer has incentives for efficient precaution Injurer Cost: W i X i +P(X v )D o D=A o Damages will be the same as the cost of the moped in this situation o By taking precaution (P) we lower this o The injurer is taking caution Victim Cost: C v X v
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Minimum cost X v =0 No precaution to be taken by the victim ° Strict liability is only efficient when the injurer can take precaution ° ° Bilateral Precaution- is the same thing as joint precaution
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