A Damage Liability Rule in a Society with Autonomously Driving Vehicles and Development of the Technology for Safety Performance (Japanese)

Akira Hibiki, Takayoshi Shinkuma and Jun Yoshida

Discussion Papers (Japanese) from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: When autonomous driving vehicles, which are currently under development, become widespread in society, liability for accidents and the amount of damage caused will be attributed solely to vehicle performance. For this reason, there are two possible solutions to accidents: a damage liability rule and a product liability rule. Shavell (2020) focuses on the decision-making of automobile drivers under a damage liability rule and found that strict liability rules do not optimize car use and development of the technology for safety performance and thus in order to achieve the first best solution, he proposes a new liability rule (hereafter referred to as the Shavell rule) where parties bear their own damages and pay the government for the victim’s damage. This study extended his model to take into account the development of the technology for safety performance by firms. Our main findings are (1) when the utility function is the same across individuals, the safety performance that is developed under the Shavell rule would be excessive, and a vehicle purchase tax based on safety performance or a technology development tax should be introduced to discourage the excessive incentive to develop the technology, (2) in the case where fair premium damage insurance is available and the premium is determined based on automobile use, the same policy as is in (1) needs to be introduced, (3) when the utility function is different among individuals, the incentives to develop the technology may need to be strengthened by a vehicle purchase subsidy based on safety performance or a technology development subsidy in some cases, (4) Under a product liability rule, the vehicle-use tax and a technology development subsidy need to be implemented.

Pages: 31 pages
Date: 2022-10
New Economics Papers: this item is included in nep-tre and nep-upt
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