3. Tort Law & Bilateral Precaution Bicyclists who ride at night can reduce the risk of getting hit by a car by wearing reflective vests. Drivers can reduce the risk of hitting a bicyclist by installing High Intensity Discharge (HID) headlights, which are brighter than normal headlights. Consider the case where there is only one driver and one bicyclist, and the likelihood of an accident for different levels of precaution is shown in the table below. The damage done by an accident is $1,000, reflective vests cost $15, and HID bulbs cost $30. Assume no insurance and a perfect court system. Driver Regular Lights HID Lights Bicylist No Vest Bicylist Vest 8% 3% 5% 1% (a) What is the expected value of protection offered to a bicyclist by a reflective vest if the driver has normal headlights? (b) What is the expected value of protection offered to a bicyclist by a reflective vest if the driver has HID headlights? (c) What is the efficient level of precaution by both sides? Driver Normal Lights HID Lights Bicyclist No Vest (d) What levels of precaution by both parties will a rule of no liability lead to? Driver Normal Lights HID Lights Bicyclist (e) What levels of precaution will a rule of strict liability lead to? Driver Normal Lights HID Lights Bicyclist No Vest Vest Vest No Vest Vest (f) What levels of precaution would a rule of simple negligence lead to? Driver Normal Lights HID Lights Bicyclist No Vest Vest (g) What levels of precaution would a rule of strict liability with defense of contributory negligence lead to? Driver Normal Lights HID Lights Bicyclist No Vest (h) Who bears the residual risk of accidents under simple negligence? Vest (i) Who bears the residual risk of accidents under strict liability with a defense of contributory negligence? (j) What can you say about the levels of driver and bicyclist activity under these two rules?