Relative fault and efficient negligence: comparative negligence explained

Comparative negligence poses a persisting puzzle in law & economics. Under standard assumptions, its performance is identical to other negligence rules, while its implementation is slightly more complex. If so, why is it the most common rule? In this paper, we advance a novel argument: comparative negligence can serve as a buffer against erroneous due-care standards.
If due-care standards are too high, a noncompliance equilibrium - where both parties take less care than the due-care standards - is more efficient than a compliance equilibrium - where both parties comply with due care. This is because, in the noncompliance equilibrium, the increase in expected accident costs is offset by a reduction in precaution costs. Comparative negligence facilitates such noncompliance equilibria, inducing parties to violate excessive due-care standards only when this is socially desirable. Thereby, comparative negligence provides for a safeguard against excessive due-care standards. We also examine the robustness of this argument when there are external effects for third parties (other than the victim) and litigation costs.