Comparative Vigilance

Abstract:     
A growing body of literature suggests that courts and juries are inclined toward division of liability between two strictly non-negligent or vigilant parties. However, standard models of liability rules do not provide for vigilance-based sharing of liability. In this paper, we explore the economic efficiency of liability rules based on comparative vigilance. We devise liability rules that are efficient and that reward vigilance exhibited by the parties. It is commonly believed that discontinuous liability shares are necessary for efficiency, but we develop a liability rule that is both efficient and continuous, based on comparative negligence when both parties are negligent and on comparative vigilance when both parties are vigilant. Moreover, our rule divides accident losses into two parts: one part creates incentives for efficiency; the other part provides equity.

Number of Pages in PDF File: 36

Keywords: Comparative vigilance, equity, economic efficiency, tort liability rules, Nash equilibrium, social costs, pure comparative vigilance, super-symmetric rule

JEL Classification: K13, D61

working papers series