An Empirical Test of the Efficiency of Liability Rules in Accident Law

Abstract

In this paper, a theoretically testable model of the incentives for injurers and victims to avoid accidents under both the comparative and contributory negligence rules is developed. The model takes account of the fact that in the automobile accident context, drivers do not know in advance with whom they will be involved in an accident and whether they will be the injurer or the victim, or both, when an accident occurs. It also allows for uncertainty in legal decision making. The theoretical model suggests that either liability rule could give drivers incentives to take economically efficient levels of care to avoid accidents, but only in special cases. The model is tested using a data set of rear end automobile accidents. The results suggest, first, that incentives to take care to avoid accidents are stronger under the new comparative negligence rule than under the older contributory negligence rule and, second, that the incentives set up by both liability rules for drivers to avoid accidents are weaker than is economically efficient.