Physicians are traditionally liable under a negligence rule of liability. Economic analysis of liability rules … physicians is sued per year. These discrepancies between the theory and actual operation of the negligence system arise primarily … incentives for physicians to practice defensive medicine and incentives for plaintiffs and defendants to invest in litigation …

cannot account for all the observed empirical relationships. -- incentives ; social norms ; physicians …

possibility of differential productivity across occupations. The model combines moral hazard and matching of physicians and … occupations with pre-matching investments. In equilibrium assortative matching takes place; more able physicians join occupations …