No-Fault for Motor Vehicles: An Economic Analysis
University of Michigan at Ann Arbor - Department of Economics
Michelle J. White
University of California, San Diego (UCSD) - Department of Economics; National Bureau of Economic Research (NBER)
American Law and Economics Review, Vol. 4, No. 2, pp. 258-294, 2002
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.
Date posted: February 29, 2008