Dari-Mattiacci, G. and Garoupa, N. (2009). Least cost avoidance: the tragedy of common safety Journal of Law, Economics, and Organization, 25(1):235--261.

This article shows that the least-cost avoider approach in tort is not necessarilythe optimal way to attain least-cost avoidance when accidents can be avoidedby either of two parties. When parties do not observe each other’s costs of careat the time of the accident and are unable to determine which party is the leastcostavoider, they fail to anticipate the outcome of the adjudication. Under thesecircumstances, accident avoidance becomes a commons problem becausecare by each individual party reduces the prospect of liability for both parties.As a result, parties suboptimally invest in care. We show that regulation removesthis problem and is superior to tort liability both when parties act simultaneouslyand when they act sequentially. We further examine how different liability rulesperform in this respect.