A further justification for the negligence rule
AbstractWe use a principal-agent framework to reexamine the implications of the negligence and strict liability rules when the tort-feasor is an agency. We assume a unilateral care situation and consider both the cases of moral hazard and of adverse selection. In both instances the negligence rule is shown to Pareto dominate the strict liability rule when the activity level is exogenously given. We find a simple condition which guarantees that the result extends to an endogenous activity level. We also examine the case where this condition is not satisfied.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Law and Economics.
Volume (Year): 19 (1999)
Issue (Month): 1 (March)
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Web page: http://www.elsevier.com/locate/irle
Other versions of this item:
- Dominique Demougin & Claude Fluet, 1998. "A Further Justification for the Negligence Rule," Cahiers de recherche du DÃ©partement des sciences Ã©conomiques, UQAM 9801, Université du Québec à Montréal, Département des sciences économiques.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
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- Gérard Mondello, 2012.
"The Equivalence of Strict Liability and Negligence Rule: A « Trompe l'œil » Perspective,"
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