Victim interdependence in the accident setting

Abstract

This paper considers the case in which potential victims affect each other by taking care. Analyzing standard liability rules, we show that the rule of strict liability with a defense of contributory negligence is in the best position to induce the efficient outcome, i.e., this liability rule ensures efficiency if victims affect each other negatively, that is care by one victim increases the accident exposure of other victims. This rule also makes attainment likely if victims affect each other positively, that is if care by one victim decreases the accident exposure of other victims. In contrast, other standard liability rules fail to induce first-best care.