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Flåm, Sjur Didrik and Wolfstetter, Elmar G. (May 2010): On Liability Insurance for Automobiles. SFB/TR 15 Discussion Paper No. 321
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Abstract

Car owners are liable for property damage inflicted on other motorists. In most countries such liability must be insured by law. That law may favor expensive or heavy vehicles, prone to suffer or inflict large losses. This paper explores links between liability rules and vehicle choice. It presumes cooperative insurance, but non-cooperative acquisition of vehicles. Thus, the Nash equilibrium and its degree of efficiency depend on the liability regime.