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.
a) efficient speed is the speed for which the car and the truck don't collide.
thus for p to be 0, then St 2 + Sc2 = 0
so the speed should be equal and opposite in direction.
b) if there is no liability then the cost of the precaution is zero. so applying it to the two equations we find the speed to be 100 km/h. the probability will be 0.2
c) since the cost of damage is given to be 4000 dollars. thus the equating it to the cost of precautions taken will be 4(100-St)
thus St= 900 km/h and Sc = 233.3km/h
d) if the cost is half of the cost of damage, then the cost of precautions = 2000 = 4(100- St)
thus, St=400 km/h and Sc = 566.6
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