In risky activities the extrinsic incentives for care are driven mainly by liability rules and by the asset levels of potential injurers. When the level of assets of the potential injurer is endogenous, we show that softer standards outperform the traditional standards based on first-best...

We study the standard economic model of unilateral accidents under the assumption that the injurers have limited assets. We identify a second-best optimal rule that selects as due care the minimum of first-best care and a level of care that takes into account the wealth of the injurer. We show...