On Liability Insurance for Automobiles

Car owners are liable for property damage inflicted on other motorists. In most countries such liability must be insured by law. That law may favor expensive or heavy vehicles, prone to suffer or inflict large losses. This paper explores links between liability rules and vehicle choice. It presumes cooperative insurance, but non-cooperative acquisition of vehicles. Thus, the Nash equilibrium and its degree of efficiency depend on the liability regime

Sequential bargaining with pure common values ∗

We study the alternating-offers bargaining problem of assigning an indivisible and commonly valued object to one of two players in return for some payment among players. The players are asymmetrically informed about the object’s value and have veto power over any settlement. There is no depreciation during the bargaining process which involves signalling of private information. We characterise the per-fect Bayesian equilibrium of this game which is essentially unique if offers are re-quired to be strictly increasing. Equilibrium agreement is reached gradually and non-deterministically. The better informed player obtains a rent. (JEL C73, C78, D44, D82