ABSTRACT
The economic purpose of tort law is to induce both injurers and victims to take precautions and to regulate their activity levels to the point that maximises their combined welfare. The law has multiple liability rules in its arsenal for inducing people to take care and to regulate their activity levels. These include negligence, strict liability, no liability, and combining negligence or strict liability with contributory or comparative negligence. This chapter explores four different accident models: unilateral care and bilateral care situations, both with and without activity-level changes. No liability causes victims to take due care and to alter their activity levels, and is thus the preferred rule when they are the lowest cost avoiders of accidents. Strict liability induces tort feasors to undertake optimal precautions and efficiently to regulate their activity levels, and is thus the best regime when injurers are the lowest cost avoiders. Negligence leads injurers to take due care, but not to alter their activity levels.
