Please contruct table and find equilibrium for NEGLIGENCE RULE (WITH EFFICIENT LEGAL STANDARD OF CARE) John can cause an accident, which entails a monetary loss of $1000 to Jane. The likelihood ofthe accident depends on the precaution decisions by both individuals. Specifically, eachindividual can choose either "low" or “high" precaution, with the low precaution requiring nocost and the high precaution requiring the effort cost of $200 to the individual who choosesthe high precaution. The following table describes the probability of an accident for eachcombination of the precaution choices by the two individuals.Jane chooses low precautionJane chooses high precautionJohn chooses low precaution0.80.5John chooses high precaution0.70.1Question:For each of the following tort rules, (i) construct a table describing the individuals' payoffsunder different precaution pairs and (ii) find the equilibrium precaution choices by theindividuals.c) Negligence rule (with efficient legal standard of care)

Under the negligence rule with efficient legal standard of care, the defendant is liable for damages…

Question: For each of the following tort rules, (i) construct a table describing the individuals' payoffs under different precaution pairs and (ii) find the equilibrium precaution choices by the individuals. c) Negligence rule (with efficient legal standard of care)

Question: For each of the following tort rules, (i) construct a table describing the individuals' payoffs under different precaution pairs and (ii) find the equilibrium precaution choices by the individuals. c) Negligence rule (with efficient legal standard of care)

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please contruct table and find equilibrium for NEGLIGENCE RULE (WITH EFFICIENT LEGAL STANDARD OF CARE)

John can cause an accident, which entails a monetary loss of $1000 to Jane. The likelihood of
the accident depends on the precaution decisions by both individuals. Specifically, each
individual can choose either "low" or “high" precaution, with the low precaution requiring no
cost and the high precaution requiring the effort cost of $200 to the individual who chooses
the high precaution. The following table describes the probability of an accident for each
combination of the precaution choices by the two individuals.
Jane chooses low precaution
Jane chooses high precaution
John chooses low precaution
0.8
0.5
John chooses high precaution
0.7
0.1
Question:
For each of the following tort rules, (i) construct a table describing the individuals' payoffs
under different precaution pairs and (ii) find the equilibrium precaution choices by the
individuals.
c) Negligence rule (with efficient legal standard of care)

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