Answer Happy

1. Recent studies point to a unexpected cost of mountain biking: infertility. It seems that the repeated shocks to the lower part of the body do damage to male reproductive capability. This problem can be addressed through more precaution on the part of bikers and also by better design on the part of the manufacturers. The table below gives the expected accident costs for each combination of precaution by manufacturers and bikers. In parentheses are the costs of the stated type of precaution. Improved design 0 Shock absorbers ($10) Softer seats ($20) Precaution by bikers Nothing $100 $80 $50 $80 $60 $46 more standing ($5) $70 $48 $43 less riding ($10) padded shorts $66 $45 $40 ($15) a. Suppose that there is no liability. What is the equilibrium level of precaution for each party? Manufacturers Bikers b. Suppose that manufacturers are fully liable. What is the equilibrium level of precaution for each party? Manufacturers Bikers c. What is the efficient level of precaution for each party? Manufacturers Bikers d. What negligence rule can bring about the efficient level of precaution? Explain.