Are Individual Care Investments Affected by Past Accident Experiences?

Abstract

Abstract In this paper, we analyze the impact of past accident experiences on individual care choices. By relying on standard economic theory and evidence of behavioral economics and psychology, we posit that individuals’ care investments should be affected by their past accidents as injurers or victims (accident-history effect hypothesis), or by their prior exposure to accident risks in the opposite role (role-reversal effect hypothesis). We test these two hypotheses using experimental data. We find that individuals’ accident history has no statistically significant effect on their care investments, but that care decisions vary with changes in the parties’ roles. Specifically, injurers with prior experience as victims invest statistically more in care than injurers without prior victim experience. By contrast, care investments are not sensitive to victims’ prior experience as injurers. Our research can be regarded as a preliminary study toward the understanding of the role of past accident experiences on individuals’ care behavior, and calls for both replication efforts and reconsideration of traditional economic models of torts.