Open Access. Powered by Scholars. Published by Universities.®

Law Commons

Open Access. Powered by Scholars. Published by Universities.®

Articles

Deterrence

Torts

1990

Articles 1 - 1 of 1

Full-Text Articles in Law

The First-Party Insurance Externality: An Economic Justification For Enterprise Liability, Jon D. Hanson, Kyle D. Logue Jan 1990

The First-Party Insurance Externality: An Economic Justification For Enterprise Liability, Jon D. Hanson, Kyle D. Logue

Articles

This Article explores the insurance and deterrence implications of important and long overlooked facts. Consumers are insured through first-party mechanisms against most of the risks of product accidents. However, first-party insurers rarely and imperfectly adjust premiums according to an individual consumer's decisions concerning exactly what products she will purchase, how many of those products she will purchase, and how carefully she will consume them. Such consumer decisions we refer to as "consumption choices. " This failure by first-party insurers to adjust premiums according to consumption choices gives rise to a first-party insurance externality. Based on this insight, this Article offers ...