Incentives to take care under contributory and comparative fault: The role of strategic complementarity

Abstract

Previous literature on contributory versus comparative negligence has shown that they reach equivalent equilibria. These results, however, depend upon an insufficiently granular model of strategic incentives under the Hand Formula that ignores courts’ information constraints. Taking information constraints into account, we identify a set of cases where care by one agent significantly increases the benefits of care by the other. When such cases obtain under bilateral harm, comparative negligence generates greater incentives for care, but this additional care occurs only when it is not socially optimal (i.e., “defensive care”). By contrast, under unilateral harm or asymmetric costs of care, contributory negligence creates socially excessive care. Therefore, it is possible to socially rank negligence regimes depending upon the symmetry of potential harm and costs of care. We discuss optimal choice of rules in light of these results.