Guerra and Hlobil, ‘Tailoring Negligence Standards to Accident Records’

Traditional economic models of accident law are static and assume homogeneous individuals under perfect information. This paper relaxes these assumptions and presents a dynamic unilateral accident model in which potential injurers differ in their probability of accident. Information about individual risk-type is hidden from the social planner and from each potential injurer. We ask how negligence standards should be optimally tailored to individual risk-type when this is imperfectly observable. We argue that information about past accident experiences helps to efficiently define negligence standards, narrowing the distance between first-best standards perfectly tailored to individual risk-type and third-best averaged standards. We finally show that negligence standards refined on the basis of past accident experiences and of individual risk-type do not undermine private incentives to undertake due care.

Guerra, Alice and Hlobil, Tobias M, Tailoring Negligence Standards to Accident Records (August 10, 2015).

First posted 2015-08-28 06:53:21

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