Ex Post Insurance Could Provide a Market Mechanism to Generate Ex-Ante Rules To drive,I require adequate liability insurance The insurance company can set any rules it wants as a condition So makes the optimal tradeoff between risk aversion and moral hazard How do we enforce the rules? Convert traffic cops into private contractors enforcing the contract Uber for(private)speeding fines?
Ex Post + Insurance Could Provide a Market Mechanism to Generate Ex-Ante Rules • To drive, I require adequate liability insurance • The insurance company can set any rules it wants as a condition • So makes the optimal tradeoff between risk aversion and moral hazard • How do we enforce the rules? • Convert traffic cops into private contractors enforcing the contract • Uber for (private) speeding fines?
Should We Punish Voodoo Killers? More generally,should we punish impossible attempts? In some sense,all failed attempts were impossible So this brings us back to "should we punish attempts
Should We Punish Voodoo Killers? • More generally, should we punish impossible attempts? •In some sense, all failed attempts were impossible • So this brings us back to “should we punish attempts
The Moral Argument for Punishing Attempts Punish on the basis of moral guilt Being a bad shot is not a moral virtue Which brings us to the problem of moral luck Should you think worse of an ex-Nazi concentration camp guard than of someone who would have been one If he happened to be born in that time and place?
The Moral Argument for Punishing Attempts • Punish on the basis of moral guilt • Being a bad shot is not a moral virtue • Which brings us to the problem of moral luck • Should you think worse of an ex-Nazi concentration camp guard than of someone who would have been one •If he happened to be born in that time and place?
Game Theory The Problem of Strategic Behavior What I do depends on what he does and... ●Vice versa
Game Theory • The Problem of Strategic Behavior • What I do depends on what he does and … • Vice versa
The Coward's Solution:Evasion ·Perfect competition ·Monopoly Doesn't work for oligopoly When my firm expands output Will my competitors drop their price to compete Or hold price,accept fewer sales?
The Coward’s Solution: Evasion •Doesn’t work for oligopoly • When my firm expands output • Will my competitors drop their price to compete • Or hold price, accept fewer sales? • Perfect competition • Monopoly