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Suppose Princess Cruise lines is providing a cruise to 1000 passengers, transporting them from Florida to Fantasy Island (where you always get what you want but learn that you really don't want what you thought you wanted). On this journey the cruise ship crashes into a jetty off Fantasy Island. The damages to the 1000 passengers equals $600,000 and Princess Cruise Lines pays the passengers this amount of money. However, Julie, the cruise director, the captain, the ship's doctor and a very influential bar tender convene and decide that Princess Cruise lines should sue the owner of Fantasy Island for recovery of the damages. Legal counsel agrees and initiates a lawsuit claiming that the owner of Fantasy Island was negligent for not having warning lights at the end of the jetty.

During the trial it is revealed that Princess Cruise lines was using a 5 year old map to negotiate its trip from Florida to Fantasy Island. Experts testify that an updated sophisticated electronic mapping device would have increased the probability of avoiding the jetty. Such a device was available for $7000. Expert testimony also reveals that the owner of Fantasy Island could have purchased a continuous flare marker to be placed at the end of the jetty for $52,000. Testimony reveals that the probability of having an accident without the electronic mapping device map was .1 and with the device the probability of the accident would have been reduced to .09 if the lighted flare marker was not there. According to the expert witness the flare marker would have reduced the probability of an accident from .1 to .01 if the mapping device was not installed and there would be a zero chance of an accident if both the mapping device and flare marker were both used.

a) How much will the owner of the Fantasy Island would have to compensate Princess Cruise Lines under a rule of negligence? Show your work.

b) How much will the owner of the Jetty have to compensate Princess Cruise Lines under a rule of negligence with contributory negligence? Show your work.

c) How much will the owner of the Jetty have to compensate Princess Cruise Lines with a rule of Strict Liability with Dual Contributory Negligence. Show your work.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M955391

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