Shared Liability and Excessive Care

Guttel, E. and Procaccia, Y. and Winter, E. (2021) Shared Liability and Excessive Care. The Journal of Law, Economics, and Organization, 37 (2). pp. 358-391. ISSN 8756-6222

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Abstract

The following supplements the discussion of a number of issues addressed in the main text. We begin by providing an example illustrating the significance of residual risk for the emergence of an excessive care equilibrium under strict liability. Second, we provide a complete proof for Proposition 2, demonstrating that excessive care may emerge as a unique equilibrium under strict liability. Third, we provide a proof for Corollary 4', establishing that the conditions stated in Proposition 4' support a large set of primitives. Finally, we discuss the Excessive Care Defense and the Efficient Strict Liability Rule within the context of the continuous model. We show that the Excessive Care Defense eliminates the equilibrium of excessive care, and that the Efficient Strict Liability Rule concurrently solves both problems of over-investment and under-investment.