Caution, Children Crossing: Heterogeneity of Victim's Cost of Care and Negligence Rule

UPF Economics and Business Working Paper No. 666

29 Pages Posted: 28 Aug 2003

See all articles by Juan-José Ganuza

Juan-José Ganuza

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Fernando Gomez-Pomar

Universitat Pompeu Fabra

Date Written: December 2002

Abstract

The paper deals with a bilateral accident situation in which victims have heterogeneous costs of care. With perfect information, efficient care by the injurer raises with the victim's cost. When the injurer cannot observe at all the victim's type, and this fact can be verified by Courts, first-best cannot be implemented with the use of a negligence rule based on the first-best levels of care. Second-best leads the injurer to intermediate care, and the two types of victims to choose the best response to it. This second-best solution can be easily implemented by a negligence rule with second-best as due care. We explore imperfect observation of the victim's type, characterizing the optimal solution and examining the different legal alternatives when Courts cannot verify the injurers' statements. Counterintuitively, we show that there is no difference at all between the use by Courts of a rule of complete trust and a rule of complete distrust towards the injurers' statements. We then relate the findings of the model to existing rules and doctrines in Common Law and Civil Law legal system.

Keywords: Imperfect information, negligence rule, accidents, heterogeneous victims

JEL Classification: K13, D82

Suggested Citation

Ganuza, Juan and Gomez-Pomar, Fernando, Caution, Children Crossing: Heterogeneity of Victim's Cost of Care and Negligence Rule (December 2002). UPF Economics and Business Working Paper No. 666, Available at SSRN: https://ssrn.com/abstract=428141 or http://dx.doi.org/10.2139/ssrn.428141

Juan Ganuza (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 19 (Phone)
(34-98) 542 17 46 (Fax)

Fernando Gomez-Pomar

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
08005 Barcelona
Spain
(34-93) 542 16 47 (Phone)
(34-93) 542 17 31 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
112
Abstract Views
1,311
Rank
441,712
PlumX Metrics