Working Paper: NBER ID: w0939
Authors: Steven Shavell
Abstract: The effect of liability rules on accident avoidance is studied in two types of situations in which potential victims and potential injurers act sequentially: those where victims act first and injurers second; and those where the reverse is true. What is of special interest about the working of liability rules in such sequential situations is that the party who acts second behaves in response to the party who acts first, and that the party who acts first takes this into account. The major result shown is that liability rules induce optimal behavior provided that they lead the party who acts second to act optimally if and only if the first party did so. In an important extension of the basic model considered, however, this result may not hold.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Victim takes care (H84) | Injurer takes care (Y60) |
| Injurer's potential liability (K13) | Victim's actions (H84) |
| Negligence rule with contributory negligence (K13) | Victim takes care (H84) |
| Negligence rule without contributory negligence (K13) | Victim does not take care (H84) |
| Strict liability with contributory negligence (K13) | Optimal outcomes achieved (L21) |
| Victim's care (H84) | Injurer takes care (Y60) |
| Liability rules induce optimal behavior (K13) | Second party takes care if first party has taken care (L14) |