On Liability Insurance for Automobiles

Sjur Flåm and Elmar Wolfstetter

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: Car owners are liable for property damage inflicted on other motorists. In most countries such liability must be insured by law. That law may favor expensive or heavy vehicles, prone to suffer or inflict large losses. This paper explores links between liability rules and vehicle choice. It presumes cooperative insurance, but non-cooperative acquisition of vehicles. Thus, the Nash equilibrium and its degree of efficiency depend on the liability regime.

Keywords: liability; mutual insurance; core; pure Nash equilibrium; anonymous games; non-atomic measure (search for similar items in EconPapers)
JEL-codes: C71 C72 D61 K13 (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-ias
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