Question

3. The collateral source rule does not allow evidence of third-party payments (such as from

an insurance company) to bar the extent of a firm’s liability for damages in a product

liability case. One common tort reform is to allow for collateral source offsets: if a

victim receives payments from a third party, that amount received reduces the amount

of damages that can be assigned to the injurer; thus, the victim cannot “double collect”

from two sources. How do you believe this reform will impact the behavior of firms

and consumers in a product liability setting?

4. In August 2010, a man was caught in Switzerland driving his $215,000 Mercedes more

than 100 miles per hour

over

the speed limit. The Swiss use two criteria to determine

the fine for speeding: The extent to which the offender exceeded the speed limit, and

the income of the offender. Using these criteria, the fine for this incident of speeding

was the largest in history – just over $1 million. Evaluate the efficiency of this approach

to deterring speeding from a Becker perspective.

Answer 1

3. Impact on behavior of Firms : Firms will have some relief with reduction in payment of damages to the consumer. With reduced financial burden, they can compete and exit in the market and do their business confidently. They will not hesitate in taking risks while introducing new products. But at the same time, may sometimes ignore consumers' safety.

Impact on behavior of Consumers : Consumers would remain more or less indifferent , as they will still be receiving appropriate compensation for their damages.

4. Monetary Fine with imprisonment has acted efficiently in deterring speeding in switzerland. But the quantum of fine becomes very high when computed on the basis of offender's income. On one hand, it has many positives like environmental safety, property protection and most importantly people's accidental safeguard. But such high speeding fine should be reduced.