Finsinger, Jörg; Pauly, Mark V. - In: The Geneva Risk and Insurance Review 15 (1990) 2, pp. 159-169
Conventional liability rules do not lead to a first best allocation. Optimal bilateral risk control can be achieved by not compensating any losses and, in addition, charging each party a fine equal to the loss suffered by the other party. In this way, each party internalizes the full accident...
