Suppose that in the cost of avoiding an accident if a motorist and pedestrian adopt a diligent strategy is $10. If an accident occurs, the pedestrian incurs accident costs of $100. If both players adopt a negligent strategy, the probability of an accident is 0.40. If either player adopts a diligent strategy, there is 0.35 chance that an accident will occur. If both players adopt a diligent strategy, the probability that an accident will occur is 0.25. What is the Nash equilibrium strategy profile for a strict-liability-with-contributory- negligence tort law regime?
A) {Negligent, Negligent}.
B) {Negligent, Diligent}.
C) {Diligent, Negligent}.
D) {Diligent, Diligent}.
E) There is no unique Nash equilibrium.

Question

Quizplus · Accepted Answer

Under a strict-liability-with-contributory-negligence regime, a negligent defendant must pay for all damages unless the plaintiff was also negligent. Here, both the motorist and pedestrian have an incentive to be diligent to reduce the probability of an accident and avoid being considered negligent, leading to a Nash equilibrium where both adopt a diligent strategy.

Suppose That in the Cost of Avoiding an Accident If