IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-04140721.html
   My bibliography  Save this paper

Social Wealth and Optimal Care

Author

Listed:
  • Giuseppe Dari-Mattiacci

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Eric Langlais

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

Many industrial accidents result in losses (material damages or bodily injury) that cannot be perfectly compensated by a monetary payment, nor be perfectly insured. Moreover, often injurers control ex ante the magnitude rather than the probability of accidents. We study the characteristics of optimal levels of care and distribution of risk under these circumstances. We then examine whether ordinary liability rules, regulation, insurance, taxes and subsidies can be used to implement the first-best outcome. Finally, our results are discuss in the light of fairness considerations (second best view).

Suggested Citation

  • Giuseppe Dari-Mattiacci & Eric Langlais, 2008. "Social Wealth and Optimal Care," Working Papers hal-04140721, HAL.
    • Handle: RePEc:hal:wpaper:hal-04140721
    Note: View the original document on HAL open archive server: https://hal.science/hal-04140721
    as

    Download full text from publisher

    File URL: https://hal.science/hal-04140721/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bruno Jullien & Bernard Salanié & François Salanié, 1999. "Should More Risk-Averse Agents Exert More Effort?," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 24(1), pages 19-28, June.
    2. Zivin, Joshua Graff & Just, Richard E. & Zilberman, David, 2005. "Risk Aversion, Liability Rules, and Safety," International Review of Law and Economics, Elsevier, vol. 25(4), pages 604-623, December.
    3. Arlen, Jennifer H, 1992. "Should Defendants' Wealth Matter?," The Journal of Legal Studies, University of Chicago Press, vol. 21(2), pages 413-429, June.
    4. Lee, Kangoh, 1998. "Risk Aversion and Self-Insurance-cum-Protection," Journal of Risk and Uncertainty, Springer, vol. 17(2), pages 139-150, November.
    5. Arlen, Jennifer H, 1992. "Liability for Physical Injury When Injurers as Well as Victims Suffer Losses," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(2), pages 411-426, April.
    6. Kim, Jeonghyun & Feldman, Allan M., 2006. "Victim or injurer, small car or SUV: Tort liability rules under role-type uncertainty," International Review of Law and Economics, Elsevier, vol. 26(4), pages 455-477, December.
    7. Neilson, William S. & Winter, Harold, 1997. "On criminals' risk attitudes," Economics Letters, Elsevier, vol. 55(1), pages 97-102, August.
    8. Chateauneuf, Alain & Dana, Rose-Anne & Tallon, Jean-Marc, 2000. "Optimal risk-sharing rules and equilibria with Choquet-expected-utility," Journal of Mathematical Economics, Elsevier, vol. 34(2), pages 191-214, October.
    9. Kaplow, Louis & Shavell, Steven, 2000. "Should Legal Rules Favor the Poor? Clarifying the Role of Legal Rules and the Income Tax in Redistributing Income," The Journal of Legal Studies, University of Chicago Press, vol. 29(2), pages 821-835, June.
    10. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    11. Philip J. Cook & Daniel A. Graham, 1977. "The Demand for Insurance and Protection: The Case of Irreplaceable Commodities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 91(1), pages 143-156.
    12. Kornhauser, Lewis A & Revesz, Richard L, 1990. "Apportioning Damages among Potentially Insolvent Actors," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 617-651, June.
    13. Kessler, Daniel P. & Rubinfeld, Daniel L., 2007. "Empirical Study of the Civil Justice System," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 1, chapter 5, pages 343-402, Elsevier.
    14. Friehe Tim, 2007. "On the Similarity of Bilateral Harm and Unilateral Harm with Role-Type Uncertainty," Review of Law & Economics, De Gruyter, vol. 3(2), pages 553-580, December.
    15. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-374, June.
    16. Friehe, Tim, 2009. "Sequential torts and bilateral harm," International Review of Law and Economics, Elsevier, vol. 29(2), pages 161-168, June.
    17. Karni, Edi, 1983. "Risk Aversion for State-Dependent Utility Functions: Measurement and Applications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 637-647, October.
    18. Leong, Avon K., 1989. "Liability rules when injurers as well as victims suffer losses," International Review of Law and Economics, Elsevier, vol. 9(1), pages 105-111, June.
    19. Kangoh Lee, 2005. "Wealth Effects on Self-Insurance and Self-Protection against Monetary and Nonmonetary Losses," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 30(2), pages 147-159, December.
    20. Dhammika Dharmapala & Sandra A. Hoffmann, 2005. "Bilateral Accidents with Intrinsically Interdependent Costs of Precaution," The Journal of Legal Studies, University of Chicago Press, vol. 34(1), pages 239-272, January.
    21. Shavell, Steven, 1981. "A Note on Efficiency vs. Distributional Equity in Legal Rulemaking: Should Distributional Equity Matter Given Optimal Income Taxation?," American Economic Review, American Economic Association, vol. 71(2), pages 414-418, May.
    22. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    23. DEHEZ, Pierre & DREZE, Jacques H., 1984. "State-dependent utility, the demand for insurance and the value of safety," LIDAM Reprints CORE 560, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    24. Jones-Lee, Michael W, 1974. "The Value of Changes in the Probability of Death or Injury," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 835-849, July/Aug..
    25. Kathleen Segerson, 1986. "Risk Sharing in the Design of Environmental Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(5), pages 1261-1265.
    26. Juan José Ganuza & Fernando Gómez, 2008. "Realistic Standards: Optimal Negligence with Limited Liability," The Journal of Legal Studies, University of Chicago Press, vol. 37(2), pages 577-594, June.
    27. Graff Zivin, Joshua & Small, Arthur A., 2003. "Risk sharing in Coasean contracts," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 394-415, March.
    28. Giuseppe Dari-Mattiacci & Gerrit De Geest, 2005. "Judgment Proofness under Four Different Precaution Technologies," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(1), pages 38-56, March.
    29. Calfee, John E & Rubin, Paul H, 1992. "Some Implications of Damage Payments for Nonpecuniary Losses," The Journal of Legal Studies, University of Chicago Press, vol. 21(2), pages 371-411, June.
    30. Miceli, Thomas J & Segerson, Kathleen, 1995. "Defining Efficient Care: The Role of Income Distribution," The Journal of Legal Studies, University of Chicago Press, vol. 24(1), pages 189-208, January.
    31. Steven Shavell, 1982. "On Liability and Insurance," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 120-132, Spring.
    32. Chateauneuf, Alain & Dana, Rose-Anne & Tallon, Jean-Marc, 2000. "Optimal risk-sharing rules and equilibria with Choquet-expected-utility," Journal of Mathematical Economics, Elsevier, vol. 34(2), pages 191-214, October.
    33. Kaplow, Louis & Shavell, Steven, 1994. "Why the Legal System Is Less Efficient Than the Income Tax in Redistributing Income," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 667-681, June.
    34. Kangoh Lee, 2005. "Wealth Effects on Self-Insurance and Self-Protection against Monetary and Nonmonetary Losses," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 30(2), pages 147-159, December.
    35. Michael Spence, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 561-572.
    36. Endres, Alfred, 1992. "Strategic behavior under tort law," International Review of Law and Economics, Elsevier, vol. 12(3), pages 377-380, September.
    37. Boyd, James & Ingberman, Daniel E, 1994. "Noncompensatory Damages and Potential Insolvency," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 895-910, June.
    38. repec:bla:econom:v:52:y:1985:i:205:p:103-16 is not listed on IDEAS
    39. Greenwood, Peter H & Ingene, Charles A, 1978. "Uncertain Externalities, Liability Rules, and Resource Allocation," American Economic Review, American Economic Association, vol. 68(3), pages 300-310, June.
    40. Cooter, Robert & Porat, Ariel, 2000. "Does Risk to Oneself Increase the Care Owed to Others? Law and Economics in Conflict," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 19-34, January.
    41. repec:dau:papers:123456789/5461 is not listed on IDEAS
    42. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
    43. Cooter, Robert D. & Porat, Ariel, 2000. "Does Risk to Oneself Increase the Care Owed to Others? Law and Economics in Conflict," Berkeley Olin Program in Law & Economics, Working Paper Series qt8c41q4fm, Berkeley Olin Program in Law & Economics.
    44. Winter, Harold, 1994. "Sequential Torts with imperfect information," International Review of Law and Economics, Elsevier, vol. 14(1), pages 35-40, March.
    45. Nell, Martin & Richter, Andreas, 2003. "The design of liability rules for highly risky activities--Is strict liability superior when risk allocation matters?," International Review of Law and Economics, Elsevier, vol. 23(1), pages 31-47, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giorgio Rampa & Margherita Saraceno, 2023. "Conjectures and underpricing in repeated mass disputes with heterogeneous plaintiffs," Journal of Economics, Springer, vol. 139(1), pages 1-32, June.
    2. Yoed Halbersberg, 2010. "Liability Standards for Multiple-Victim Torts: A Call for a New Paradigm," Discussion Paper Series dp533, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Langlais, Eric, 2010. "Safety and the Allocation of Costs in Large Accidents," MPRA Paper 25710, University Library of Munich, Germany.
    2. Friehe, Tim & Langlais, Eric, 2015. "On the political economy of public safety investments," International Review of Law and Economics, Elsevier, vol. 41(C), pages 7-16.
    3. Éric Langlais, 2010. "Les criminels aiment-ils le risque ?," Revue économique, Presses de Sciences-Po, vol. 61(2), pages 263-280.
    4. Liqun Liu & Andrew Rettenmaier & Thomas Saving, 2009. "Conditional payments and self-protection," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 159-172, April.
    5. Zivin, Joshua Graff & Just, Richard E. & Zilberman, David, 2005. "Risk Aversion, Liability Rules, and Safety," International Review of Law and Economics, Elsevier, vol. 25(4), pages 604-623, December.
    6. Courbage, Christophe & Rey, Béatrice & Treich, Nicolas, 2013. "Prevention and precaution," TSE Working Papers 13-445, Toulouse School of Economics (TSE).
    7. Langlais, Eric, 2006. "Criminals and risk attitude," MPRA Paper 1149, University Library of Munich, Germany, revised 15 Sep 2006.
    8. L. A. Franzoni, 2016. "Optimal liability design under risk and ambiguity," Working Papers wp1048, Dipartimento Scienze Economiche, Universita' di Bologna.
    9. Richard Peter, 2024. "The economics of self-protection," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 49(1), pages 6-35, March.
    10. Juan José Ganuza & Fernando Gómez, 2003. "Optimal negligence rule under limited liability," Economics Working Papers 759, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2004.
    11. Hackney, James Jr., 2003. "Law and neoclassical economics theory: a critical history of the distribution/efficiency debate," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(4), pages 361-390, September.
    12. Tim Friehe, 2008. "On judgment proofness in the case of bilateral harm," European Journal of Law and Economics, Springer, vol. 26(2), pages 175-185, October.
    13. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    14. Lee Kangoh, 2016. "Risk Aversion, the Hand Rule, and Comparison between Strict Liability and the Negligence Rule," Review of Law & Economics, De Gruyter, vol. 12(2), pages 261-274, July.
    15. Hofmann, Annette, 2005. "Internalizing externalities of loss-prevention through insurance monopoly: An analysis of interdependent risks," Working Papers on Risk and Insurance 16, University of Hamburg, Institute for Risk and Insurance.
    16. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc.
    17. Friehe, Tim, 2009. "Sequential torts and bilateral harm," International Review of Law and Economics, Elsevier, vol. 29(2), pages 161-168, June.
    18. Christian Gollier & James Hammitt & Nicolas Treich, 2013. "Risk and choice: A research saga," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 129-145, October.
    19. Hoffmann, Sandra A. & Hanemann, W. Michael, 2005. "Torts and the Protection of "Legally Recognized" Interests," Discussion Papers 10472, Resources for the Future.
    20. Jimin Hong & Kyungsun Kim, 2021. "Self-insurance and saving under a two-argument utility framework," Journal of Economics, Springer, vol. 134(1), pages 73-94, September.

    More about this item

    Keywords

    accidents; risk; wealth; care; bodily injury;
    All these keywords.

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-04140721. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.