No-Fault for Motor Vehicles: An Economic Analysis

Yu-Ping Liao and Michelle J. White

American Law and Economics Review, 2002, vol. 4, issue 2, 258-294

Abstract: This article compares incentives and efficiency under the pure tort system (the comparative negligence rule) to those under pure and mixed no-fault systems. Under no-fault systems, drivers are allowed to opt out of no-fault and file lawsuits if their damages exceed a certain threshold. We find that no single liability system always dominates on efficiency grounds, but the pure tort system does best when costs of care are low, and pure no-fault does best when costs of care are high. Choice systems, in which drivers choose between no-fault or pure tort systems, lead to less efficient results because drivers choose the pure tort rule too often. Copyright 2002, Oxford University Press.

Date: 2002
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