Publisher:
Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), Düsseldorf
Abstract:
In the economic analysis of liability law, information about accident risk and how it can be influenced by precautions is commonly taken for granted. However, a profound understanding of the relationship between care and accident risk often requires learning-by-doing. In a two-period model, we examine the implications for the optimal level of care and behavior under strict liability and negligence, showing that liability law may not induce efficient incentives.