Case Study 2: Economic MODEL OF ACCIDENTS

Economic MODEL OF ACCIDENTS

unilateral precaution model
due
axtFriday

t liability no pay my

CASE STUDY 2

Case Study 2 Neiman Marius NM v Copley Place

Associates CPA

Q1 legal background understanding facts
be specifin on write the breach of contract is

allegedly

Q2 AMODELING A

legal what is a stay
economies why are they asking EEGnn

why do they prefer FEET

ng g gg gg g g g

IF arbitration is staged and if arbitration
isn’t

ECAnncarbitration Pwi
award t plow x lost

MB That

hwtofgs.gg
LITIGATION CANNOT INCLUDE DAMAS AWARDED IN

03 ORESEARCH D

demonstrate you understand effinient breach

syggggq.gg

a performance AT THE TIME THE Contract

WAS BREATHED
needs evaluation i.e s

what other parties would have incurred

warp
costs a benefits had tower been built

EYE
identify then parties and saves of
benefit lost and describe how you’d

evaluate these benefitscost

04 NM seeking 450m in damages

sauce realized explicit lost

realized oppaunity costs ad

unrealized opportunity cost ble star

never expanded

Is 550m a good fair approximation of
expectation damages

YES provide evidence showing 50 I

hair

No Y harm

ECONOMIC MODEL OF ACCIDENTS

how to incentivize precaution to bedua accident

start w a model of UNILATERAL PRECAUTION

only injurer OR victim can take precaution

X an amount of precaution
precautionw the marginal cost of precaution

wx total cost of

pix the probability of accident decreasing in x

p
x to 12p x so health

A monetary harm incurred by victim a

full compensatory damages adjieath
D damages paid by injurer

for now for simplicity assume full damages
D Al

START What should happen

what amount of prelaution x minimizes social

expected costs

min E Seen w x pox A
FEalyenditurexpected harm a a

function of precaution

I

dE
o w Fit A O

w p x A

invest in puelaction up until the marginal
cost Ca is equal to the marginal benefit
f pint reduction in expected costs

EFFICIENT PRECAUTION

MC x I ECMB y
an won’t concern
ourselves with
wer precaution

INEFFICIENT PRECAUTION

MCCX C ECMBCx

investing mare in panama o

est than it saves

aMCCA s ECMBLx affasouabiamant

w
pixA Scat

q
Wh

e
w f i

i pha EACH
I