Steven M. Shavell, Liability for Accidents, in The New Palgrave Dictionary of Economics (Steven N. Durlauf & Lawrence E. Blume eds., 2nd ed. 2008).
Abstract: Legal liability for accidents determines the circumstances under which injurers must compensate victims for harm. The effects of liability on incentives to reduce risk, on risk-bearing and insurance (both direct coverage for victims and liability coverage for injurers), and on administrative expenses are considered. Liability is also compared with other methods of controlling harmful activities, notably, with regulation and corrective taxation.