On Negligence Rules and Self-Selection

Economic models of negligence ordinarily involve a single standard of care that all injurers must meet to avoid liability. When injurers differ in their costs of care, however, this leads to distortions in their care choices. This paper derives the characteristics of a generalized negligence rule that induces injurers to self-select their optimal care levels. The principal features of the rule are (1) the due standard of care is maximal, and (2) liability increases gradually as injurers depart further from this standard. The results are broadly consistent with the gradation in liability under certain causation rules and under comparative negligence.

Varying Injurer Costs of Care, Negligence, and Self-Selection

Standard economic models of negligence set a single standard of care to which all injurers must conform. When injurers differ in their costs of care, this leads to distortions in individual care choices. This paper derives the characteristics of a negligence rule that induces optimal care by all injurers by means of self-selection. The principal features of the rule are (1) the due standard is set at the optimal care of the lowest cost injurer, and (2) liability increases gradually rather than abruptly as care falls below this standard. The results are consistent with the gradation in liability under certain causation rules and under comparative negligence.