Consider a potential injurer, a chemical factory which disposes polluted water into the ground. The polluted water is a by−$$product of the chemical the factory produces. The potential victims are town residents living not far from the factory and who use the ground water. If the factory pollutes less, the residents are less likely to fall sick. The residents get utility from using the ground water but also more likely to fall sick if they use the ground water more. Explain if either negligence or strict liability will give you first best ($($efficient)$)$ activity level and first best care. Which rule would you recommend and why? 

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This question is asking about the implementation of liability rules in the context of a polluting factory and whether a strict liability rule or a neg... View the full answer