Jim Whitney Economics 357

Outcomes under alternative negligence rules
Cost allocation tables in the event of an injury

General information:
1. Total loss if an injury occurs = 100, divided between the parties. For example, if the victim collects damages equal to the loss, then victim cost = 0 and injurer cost = 100.
2. If you expect a loss = 100 whether or not you are negligent, you choose not to be negligent, since you internalize the entire loss and you gain from all cost-justified safeguards.
3. If you expect a loss = 0 whether or not you are negligent, you choose to be negligent, since you internalize none of the loss, so you gain nothing from spending on costly safeguards.
To do:
1. Complete the cost allocation table.
2. Decide which cell the parties will end up in.
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Case 1: Simple negligence:

 

                \victim cost
injurer cost \

Victim negligent?
a. Yes b. No
Injurer negligent? 1. Yes a1   \     
\
b1

                 \   0 
          100   \

2. No a2 \  
 \
b2 \  
\

Case 2: Contributory negligence:

 

                \ victim cost
injurer cost \

Victim negligent?
a. Yes b. No
Injurer negligent? 1. Yes a1   \     
\
b1

                 \   0 
          100   \

2. No a2 \  
 \
b2 \  
\

Case 3: Comparative negligence (with qi = injurer's share of negligence)

 

                \ victim cost
injurer cost \

Victim negligent?
a. Yes b. No
Injurer negligent? 1. Yes a1   \     
\
b1

                 \   0 
          100   \

2. No a2 \  
 \
b2 \  
\