Explain why the incentive problem cannot be solved

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Reference no: EM131908313

Question: 1. Explain why the incentive problem in the previous question cannot be solved by a rule of strict liability with imperfect compensation (say, actual compensation equal to 50 percent of perfect compensation).

2. A game is in equilibrium when no player can increase his or her payoff by changing strategy, so long as the other players do not change their strategies. Prove that the simple liability game is in equilibrium when the injurer and the victim take efficient care.

Reference no: EM131908313

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