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The reasonable person standard: trading off static and dynamic efficiency |
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| Authors: | Alfred Endres Tim Friehe |
| Institution: | 1. Department of Economics, University of Hagen, Profilstr. 8, 58084, Hagen, Germany 2. Department of Economics, University of Witten/Herdecke, Witten, Germany 3. University of Konstanz, Konstanz, Germany 4. CESifo, Munich, Germany |
| Abstract: | This paper compares the performance of a due care standard which is tailored to individual precaution costs to that of the reasonable person standard. This is done in a framework in which injurers can reduce their precaution costs via investment in progressing care technology. We show that the reasonable person standard may invoke better investment incentives, pointing to a potential trade-off between static and dynamic efficiency. |
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