## Economic Analysis of Accident LawAccident law, if properly designed, is capable of reducing the incidence of mishaps by making people act more cautiously. Scholarly writing on this branch of law traditionally has been concerned with examining the law for consistency with felt notions of right and duty. Since the 1960s, however, a group of legal scholars and economists have focused on identifying the effects of accident law on people's behavior. Steven Shavell's book is the definitive synthesis of research to date in this new field. |

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### Contents

Introduction | 1 |

Organization of the Book | 3 |

Liability and Deterrence Basic Theory | 5 |

Unilateral Accidents | 6 |

Bilateral Accidents | 9 |

Unilateral Accidents | 21 |

Bilateral Accidents | 26 |

Mathematical Appendix | 32 |

72 Injurers Inability to Pay for Losses | 167 |

73 Vicarious Liability | 170 |

74 Limited Liability of Shareholders for Losses Caused by Corporations | 175 |

Mathematical Appendix | 177 |

The Allocation of Risk and the Theory of Insurance | 186 |

82 The Theory of Insurance | 192 |

Mathematical Appendix | 199 |

Liability Riskbearing and Insurance Basic Theory | 206 |

Liability of Firms | 47 |

31 The Case Where Victims Are Strangers to Firms | 48 |

32 The Case Where Victims Are Customers of Firms | 51 |

Mathematical Appendix | 64 |

Factors Bearing on the Determination of Negligence | 73 |

42 Prior Precautions | 77 |

43 Uncertainty Error and Misperception | 79 |

44 Implications of Findings of Negligence | 83 |

Mathematical Appendix | 86 |

Causation and the Scope of Liability | 105 |

52 Coincidental Accidents | 110 |

53 Uncertainty over Causation | 115 |

Mathematical Appendix | 118 |

The Magnitude of Liability Damages | 127 |

62 The Probability of Losses | 128 |

63 Courts Uncertainty about the Level of Losses | 131 |

64 Pecuniary versus Nonpecuniary Losses | 133 |

65 Economic Losses | 135 |

66 Particularistic Elements in the Computation of Liability | 140 |

67 Victims Opportunities to Mitigate Losses | 144 |

68 Liability in Excess of Losses | 146 |

Mathematical Appendix | 151 |

Other Topics in Liability | 164 |

92 The Accident Problem in the Absence of Liability | 208 |

94 The Accident Problem Given Liability and Insurance | 210 |

Mathematical Appendix | 215 |

Liability Riskbearing and Insurance Extensions to the Basic Theory | 228 |

102 Awards Optimal for Compensation versus Awards Optimal for Deterrence | 231 |

103 Victims Collateral Insurance Benefits and Injurers Liability | 235 |

104 Injurers Inability to Pay and Liability Insurance | 240 |

105 Structure of a System of Pure Accident Insurance | 243 |

Mathematical Appendix | 245 |

Liability and Administrative Costs | 262 |

112 The Private Motive to Make Claims versus Their Social Desirability | 265 |

Mathematical Appendix | 270 |

Liability versus Other Approaches to the Control of Risk | 277 |

122 Factors Bearing on the Appeal of Ex Ante versus Ex Post Approaches | 279 |

123 Factors Bearing on the Desirability of Privately Initiated versus StateInitiated Approaches | 283 |

124 Factors Bearing on the Appeal of Nonmonetary Criminal Sanctions | 284 |

125 Concluding Observations | 285 |

Mathematical Appendix | 286 |

Critical Comments | 291 |

Purpose and Future of Accident Liability | 297 |

299 | |

307 | |

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### Common terms and phrases

act optimally administrative costs assets assumed behavior causation claims comparative negligence contributory negligence courts customers defense of contributory economic losses engage ex ante example exceed expected accident losses expected liability expected losses expected utility factors firms found negligent harm Hence incentives to reduce Ineq injurer's injurers and victims injurers are risk injurers will choose injurers will take led to take less level of activity level of care level of due level of losses liability equals liability insurance liability rules liability system losses they cause magnitude of liability marginal utility minimize negligence rule nonpecuniary losses observe Pareto optimal parties percent premium prior precautions probability PROPOSITION purchase reduce risk result risk averse risk neutral scope of liability Shavell situation social losses social welfare socially desirable socially optimal level strict liability subrogation Suppose take due take optimal tort tort law total accident costs vicarious liability victim firm's wealth