Accident Law and Markets, Part II: The Bilateral Care Model


Up to this point we have analysed tort laws under the assumption that the victim cannot take any care. Let us now drop this assumption. That is, suppose now that the victim can also take action (in the form of care or precaution) that reduces expected harm. This situation is referred to as the bilateral care model. The approach outlined in this chapter not only allows us to study a much wider set of situations; the possibility that a second party can affect the probability and extent of harm introduces new complications and also means that legal rules will potentially become more complex.

The chapter is structured as follows. Section 5.2 outlines the basic bilateral care model. Section 5.3 analyses the legal rules that were introduced in Chapter 4 in the bilateral care model setting using basic game-theoretic tools, and discusses several applications and extensions. Section 5.4 examines the bilateral care model in a setting of perfectly competitive markets. Section 5.5 introduces some new legal rules that can be analysed within the bilateral care model, and provides an example of where such rules prove to be the class of rules that induce parties to behave efficiently.

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