Reference no: EM132298086

Suppose that the probability of an accident occurring depends on the level of care given by the injurer. The harms from the accident are evaluated to be 1000, while the probability of that accident occurring are as follows:

Level of Care

Cost of Care

Probability of Harm

None

0

50%

Low

120

16%

Medium

150

6%

High

250

2%

Suppose that the injurer can also take care to prevent an accident. If the victim gives care, the probability of harm and cost of harm are as specified above. Without care, the cost of harm is the same as above but the probability of harm doubles. If victim care costs 50.

Is care by the victim optimal? What level of care by the injurer is optimal? Explain.