It leads to drivers driving inefficiently slowly, since each wants to be slower than the other. Whatever speed I am driving, you get a large gain in reduced liability by going just a little slower than that. A full analysis would get complicated. C. Consider a one-sided accident. Cars do significant damage to pedestrians, pedestrians do negligable damage to cars.
Pedestrians have an inefficiently low incentive to avoid accidents.
Since the driver will not be negligent he will not be liable, so the pedestrian will bear all costs, so it is in his interest to take all cost-justified precautions too. This assumes that the court can accurately observe what precautions the driver is taking, judge what precautions he should be taking, and measure damages. E. Suggest an alternative rule that solves some of the problems you have mentioned with these rules. The obvious problem is that when an accident occurs, the driver pays the pedestrian not to report it. The tank is strictly liable 2.