Posted: 29 Feb 2008
This article compares incentives and efficiency under the pure tort system (the comparative negligence rule) to those under pure and mixed no-fault systems. Under no-fault systems, drivers are allowed to opt out of no-fault and file lawsuits if their damages exceed a certain threshold. We find that no single liability system always dominates on efficiency grounds, but the pure tort system does best when costs of care are low, and pure no-fault does best when costs of care are high. Choice systems, in which drivers choose between no-fault or pure tort systems, lead to less efficient results because drivers choose the pure tort rule too often.
Suggested Citation: Suggested Citation
Liao, Yu-Ping and White, Michelle J., No-Fault for Motor Vehicles: An Economic Analysis. American Law and Economics Review, Vol. 4, No. 2, pp. 258-294, 2002. Available at SSRN: https://ssrn.com/abstract=874202