10. An increase in the cost of a particular type of accident.

When the cost of a particular type of accident increases, it will cause a decrease in the

efficient level of precaution. This happens mainly because as the cost of a particular type of

accident increases, the marginal cost of precautions becomes lesser than the marginal cost of

benefit. Or, at each level of precaution, marginal benefits become higher as a result of the

increase in the cost of a particular type of accident.

In order to deal with such situations, keep on increasing the level of precaution till the

marginal costs become equal to marginal benefits. Lets say, there is an increase in the costs of

accidents due to drunk driving. To deal with such situation, increase the level of precaution,

which will decrease both -p(x) and marginal benefits, -p(x) A. This should continue until the

marginal costs equal marginal benefits again.

11 .An external change, i.e., something not attributable to the actions of potential

injurers or victims that reduces the marginal probability of an accident, ceteris paribus.

In case of an external change i.e. something which isnt directly attributable to the actions

of potential victims or injurers that brings down the marginal probability of an accident, ceteris

paribus, will cause the economically efficient precaution to increase. This is because an external

change brings down the marginal benefits of precaution and becomes below the level of

accompanying marginal costs. Or, marginal benefit now keeps on going lower at each level of

precaution.

To address this, the level of precaution should be brought down until the marginal

benefits again become equal to the marginal costs. Example, in an event of earthquake, level of
precaution should be decreased thus, increasing the level of both -p(x) and marginal benefits,

-p(x) A. This should continue until the marginal costs equal marginal benefits again.