No-Fault for Motor Vehicles: An Economic Analysis

Posted: 29 Feb 2008  

Yu-Ping Liao

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)

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Abstract

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

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

Yu-Ping Liao (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Michelle J. White (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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