- It’s been estimated that if a truck collides with a car, the
damage to the car one is AC = $4,000. There is
no damage to the truck. The probability of a collision is described
by p(sT, sC) =
(sT2+
sC2)/100,000, where
sT is the truck speed and
sC is the car speed, in km/h. The maximum speed
the vehicles are capable of is 100 km/h.
Each driver can take precautions;
assume the only feasible precaution is to reduce the speed. The
cost of taking precautions by the truck driver is 4×(100 –
sT), that is the truck driver loses $4 value
for every 1 km/h slowing down. The cost of taking precautions by
the truck driver is 3×(100 – sC), that is the
car driver loses $3 value for every 1 km/h slowing down.
- Suppose the rule is strict liability = the truck
driver must fully compensate the car owner for the damages no
matter how they drive, in case of an accident. What speed would the
truck driver choose? What speed would the car driver choose? How
often do collisions happen (i.e., what is the probability of a
collision p) at these chosen speeds?
- Suppose the rule is shared liability = the truck
driver must compensate the car owner for half of the damages no
matter how they drive, in case of an accident. What speed would the
truck driver choose? What speed would the car driver choose? How
often do collisions happen (i.e., what is the probability of a
collision p) at these chosen speeds?