The Implications of Different Liability Rules for The Provision of A Risky Public Good

Abstract

This article analyzes the implications offour liability rules for the provision of safety by the state and the consumer (victim) of a public good, and for the quantity of the public good, in both the ideal and normal states. Risk is incorporated into the traditional model of the provision of a public good by adding expected damages and the cost of providing safety. This analysis indicates that when the state's provision of safety is the sole determinant of the probability of damages, then only a rule of strict liability generates the efficient provision of safety and output for both ideal and normal states. When both the state and the victim can influence the probability of damages, then only a rule of strict liability with contributory negligence will generate the efficient provision of safety by both the state and the victim, as well as the efficient quantity in both the normal and ideal states.