Explain why the incentive problem in the previous question cannot be solved by a rule of strict liability with imperfect compensation (say, actual compensation equal to 50 percent of perfect compensation). previous question: Assume that you park your car in a legal parking space on a corner, and a driver who comes around the corner too fast rams the bumper of his truck into your car, damaging your car but not his truck. A rule of no liability gives the driver of the truck the same incentives to avoid such accidents as the incentives given to you to park your car in a safe place under a rule of strict liability with perfect compensation. Explain why.
Explain why the incentive problem in the previous question cannot be solved by a rule of strict liability with imperfect compensation (say, actual compensation equal to 50 percent of perfect compensation). previous question: Assume that you park your car in a legal parking space on a corner, and a driver who comes around the corner too fast rams the bumper of his truck into your car, damaging your car but not his truck. A rule of no liability gives the driver of the truck the same incentives to avoid such accidents as the incentives given to you to park your car in a safe place under a rule of strict liability with perfect compensation. Explain why.
Chapter8: Game Theory
Section: Chapter Questions
Problem 8.11P
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![Explain why the incentive problem in the previous question cannot be solved by a rule of strict liability
with imperfect compensation (say, actual compensation equal to 50 percent of perfect compensation).
previous question: Assume that you park your car in a legal parking space on a corner, and a driver
who comes around the corner too fast rams the bumper of his truck into your car, damaging your car
but not his truck. A rule of no liability gives the driver of the truck the same incentives to avoid such
accidents as the incentives given to you to park your car in a safe place under a rule of strict liability
with perfect compensation. Explain why.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F84301bf1-f450-4e19-851b-31aeb19a7fcd%2Fb09d1ad5-bad5-478e-88ba-ce7bb696e177%2Ffqpm0mm_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Explain why the incentive problem in the previous question cannot be solved by a rule of strict liability
with imperfect compensation (say, actual compensation equal to 50 percent of perfect compensation).
previous question: Assume that you park your car in a legal parking space on a corner, and a driver
who comes around the corner too fast rams the bumper of his truck into your car, damaging your car
but not his truck. A rule of no liability gives the driver of the truck the same incentives to avoid such
accidents as the incentives given to you to park your car in a safe place under a rule of strict liability
with perfect compensation. Explain why.
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