The prevailing view in the law and economics literature is that preventing firms and consumers from contracting out of mandatory liability rules is optimal only if consumers are irrational or misperceive the risks of the products they buy. In this paper, I show that even if consumers do...

The prevailing view in the law and economics literature is that preventing firms and consumers from contracting out of mandatory liability rules is optimal only if consumers are irrational or misperceive the risks of the products they buy. In this paper, I show that even if consumers do...

Imagine a pedestrian and driver both approaching a crosswalk. Both parties can take actions to prevent an accident, and traditional economic analysis of tort law recognizes the importance of making sure that both parties have an incentive to do so. However, traditional negligence rules can...