ECO 463
Torts
Provide brief explanations as well as your answers.
1. Consider a unilateral care accident model in which the injurer can either take care at a
cost of $80 or no care. Further suppose that the probability of an accident is zero if care is
ta
ECO 463
Microfoundations
Provide brief explanations as well as your answers.
1. Two people could benet by cooperating on a joint project. Each person can either cooperate at a cost of 29 dollars or nk at no cost. If both choose to cooperate then each will
ECO 463
Introduction
Provide brief explanations as well as your answers.
1. Suppose a law is passed that prohibits farmers from using certain chemical fertilizers
because they contaminate ground water. The value of the expected reduction in illness to
wat
ECO 463
DisputeResolution
Provide brief explanations as well as your answers.
1. A plainti and defendant estimate the same probability of plainti victory at trial, 1/4, but
disagree about the amount that a victorious plainti will recover. The plainti esti
ECO 463
Crime
Provide brief explanations as well as your answers.
1. Suppose that the number of speeders during a holiday weekend, n, is related to the expected ne, p f , by the expression n = 2000/(pf ). While there is no social cost to
imposing the ne,
ECO 463
Property
Provide brief explanations as well as your answers.
1. Suppose that a lake is collectively owned by 3 shermen. If ti denotes the amount of time
that the ith sherman spends shing per day, then the total value of the sh caught by all
of the
ECO 463
Contracts
Provide brief explanations as well as your answers.
1. Consider a variant of Akerlofs 1970 lemons model in which the quality of a used car is
indexed by q. There are several potential risk-neutral sellers and many potential riskneutral b
Economics 463
Spring 2013 Assignments
This is a preliminary version; check frequently for updates. Below F denotes Friedmans
Laws Order and H denotes a handout from the web site. Problems will be posted on the web
site as pdf les. The nal exam for this cl
Assessment Equilibria
A
LTEX le: Assessment Daniel A. Graham, September 29, 2011
Seltens Horse, illustrated in Figure 1, is a well known extensive form (dynamic) game of incomplete information. At his information node, Player 3 does not know whether the h
Crime 1-3
Question 1:
a. f = 50. We want to find the fine that yields the lowest expenditure e, while keeping 2000/
(pf) < 50. Therefore, pf > 40.
f*(e+800)/(e+1000) > 40
Setting e = 0, at lowest expenditure
f*(0+800)/(0+1000) > 40
f > 50
b. e = 800. Let
Question 4
Part a
a. e = 0. The probability e refers to the decision on the negligent defendant. If the
negligent defendant is always liable, 1-e = 1, and e = 0.
b. f = 1. The probability f refers to the decision on the non-negligent defendant. If the non
Expected Utility Analysis
A
LTEX le: expectedutility Daniel A. Graham, September 8, 2011
1 Preferences for Probabilities
We now turn to characterizing preferences for lotteries with the goal of identifying a utility
function to represent these preferences
Torts 4, 5, 6
Alex Kim, David Wang, Dylan Gamret
Question 4:
B = $11
PL = (1/4 - 1/8)*(1/5000)*500000 = 25
B < PL
Yes. The reduction in probability of fire is 1/4 1/8 and thus the expected loss (PL) equals 25.
Therefore its cheaper for the manufacturer to
The Cumulative Distribution and Stochastic Dominance
A
LTEX le: StochasticDominance Daniel A. Graham, September 1, 2011
A decision problem under uncertainty is frequently cast as the problem of choosing among
a set of stochastic variables. Not much is los
Economics 463
Law and Economics
term:
instructor:
email:
oce:
oce hours:
text:
requirements:
approach:
course web site:
Spring 2013
Dan Graham
daniel.graham@duke.edu
242 Social Sciences
2pm - 3pm on class meeting days. Please email for appointments for ot
Law and Econ
Contracts 1
Alex Kim, David Wang, Dylan Gamret
a. There is a separating equilibrium in which every seller makes a truthful
disclosure. We expect that at any given time, sellers with car quality above the
expected value of the car will disclos
1.a) (fink, fink), Fink is a weakly but not strongly dominant strategy for both players. From
(fink, fink), two players cannot move anywhere since such move will end up either of them with
lower money (from 0 to -29). At (coop, coop), moving to next colum
1. a) 0.25 x $800 - $20 = $180
b) 0.25 x $640 + $5 = $165
c) Trial. Expected cost is $165 for the defendant but expected value of the trial to the plaintiff is
$180. Unless the plaintiff gets compensated by more than $180, he will not compromise and the
d
a) 1. lj c is the expected value to go to trial for the plaintiff
2. (1 p) (lj c) + p(hj +c) because the defendant has to also consider where the
plaintiff has a high probability p
3. hj c because whether the probability is high or low, plaintiff will acc
Econ 463
HW 6, Microfoundations 5
David Wang, Alex Kim, Dylan Gamret
1/31/2013
5. Frank
a. Pay $56. 0.08*700 = 56
b. $21. Frank is risk-neutral, so he would just need to be compensated by the
difference in expected value. That is $56 0.05*$700 = $21
c. $2
Alex Kim
Law and Economics Problem Set 2
January 16, 2013
3.a) Doctor has to move. Provided that the cost entailed ($250) is a sunk cost,
even if injunction is granted, it cost $150 for the confectioner to move. This
amount is bigger than how much it woul
B < PL
Driver Liable - Driver takes care, pedestrian doesnt
Pedestrian Liable - Pedestrian takes care, driver doesn't
Both Liable
B
P
L
B
P
L
B
P
100
0.5
1000
100
0.5
200
200
B
PL
100
B
500
Hands Law Yes
c(x)
c(y)
d
PL
100
B
100
Victim
No Care
-300
-760
p
Nash Rehash
A
LTEX le: nashrehash Daniel A. Graham, August 30, 2007
This is a summary of the essential aspects of the strategic form of a game which is characterized by a set of players, a set of actions available to each player and preferences of each pl
Law and Economics Paper
Alex Kim
A bilateral auto-accident occurs on a highway such that a driver (the injurer) hits the pedestrian (the victim) and
the victim is killed immediately. The injurer could have been either careless or careful, and/or the victi
Car accident
Driver speeding (careless)/not speeding (careful), victim on highway could have been careful/not careful
Both driver and victim were careful? Either or none?
Verifiable without cost whether the driver was speeding, or expensive to verify
Is t
Tort (Chap 14)
I walk with my friend down the street. Something falls on him and he dies. Am I liable?
Two hunters shoot the third hunter, mistaken for dear. One through heart, one through brain
Nuclear reactor leak and DES drug (causes fertility problem)
Crime Law is all about efficiency. Cost vs. benefit concept two ways obtaining a car (steal
or buy), as long as the cost of stealing (punishment) is more expensive than purchasing
the car, an individual will buy
Hence, crime law aims for a punishment tha
Torts
1. a) $80 is the cost of taking precautions
b) $200. P (probability of loss)*L (gravity of loss) = *800 = 200
c) Yes. B < PL (80 < 200), therefore it is efficient to take care.
d) Yes, because res ipsa loquitur states that the elements of duty of ca