Document Type

Article

Publication Year

2007

Journal Title

The Journal of Law, Economics, & Organization

ISSN

8756-6222

Abstract

This paper shows that the least cost avoider approach in tort is not necessarily the optimal way to attain least cost avoidance when accidents can be avoided by either of two parties. When parties do not observe each other's costs of care at the time of the accident and are unable to determine which party is the least cost avoider, they fail to anticipate the outcome of the adjudication. Under these circumstances, accident avoidance becomes a commons problem because care by each individual party reduces the prospect of liability for both parties. As a result parties suboptimally invest in care. We show that regulation removes this problem and is superior to tort liability both when parties act simultaneously and when they act sequentially. We further examine how different liability rules perform in this respect.

First Page

235

Last Page

261

Num Pages

27

Issue Number

1

FIle Type

PDF

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