Screening accident victims

This paper considers victim heterogeneity in harm levels in a bilateral-care model, where harm is private information. In practice, resources are expended on the verification of damages suffered. We establish a sufficient condition for the possibility to accurately deduce the harm level from the obs...

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Bibliographic Details
Published in:International review of law and economics 2009-09, Vol.29 (3), p.272-280
Main Author: Friehe, Tim
Format: Article
Language:English
Subjects:
Accidents
Asymmetric information
Bilateral care
Bilateral care Incentives Heterogeneous victims Information asymmetry
Caring
Damage
Decision making
Decision theory
Economic models
Equilibrium
Heterogeneous victims
Incentives
Information
Information asymmetry
International law
Medical care
Studies
Verification
Victims
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Summary:This paper considers victim heterogeneity in harm levels in a bilateral-care model, where harm is private information. In practice, resources are expended on the verification of damages suffered. We establish a sufficient condition for the possibility to accurately deduce the harm level from the observable care choice without spending on verification. For cases in which this condition does not hold, this paper sets out a simple screening mechanism that induces victims to reveal their type truthfully and induces optimal care in equilibrium without verification costs.
ISSN:0144-8188
1873-6394
DOI:10.1016/j.irle.2009.03.002