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A note on optimal care by wealth-constrained injurers

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  • Miceli, Thomas J.
  • Segerson, Kathleen

Abstract

This paper clarifies the relationship between an injurer's wealth level and his care choice by highlighting the distinction between monetary and non-monetary care. When care is non-monetary, wealth-constrained injurers generally take less than optimal care, and care is increasing in their wealth level under both strict liability and negligence. In contrast, when care is monetary, injurers may take too much or too little care under strict liability, and care is not strictly increasing in injurer wealth. Under negligence, the relationship between injurer care and wealth is similar in the two formulations. However, when litigation costs are added to the model, the relationship between injurer care and wealth becomes non-monotonic under both liability rules.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Law and Economics.

Volume (Year): 23 (2003)
Issue (Month): 3 (September)
Pages: 273-284

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Handle: RePEc:eee:irlaec:v:23:y:2003:i:3:p:273-284

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Web page: http://www.elsevier.com/locate/irle

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References

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  1. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9483, National Bureau of Economic Research, Inc.
  2. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
  3. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
  4. Hylton, Keith N., 1990. "The influence of litigation costs on deterrence under strict liability and under negligence," International Review of Law and Economics, Elsevier, vol. 10(2), pages 161-171, September.
  5. Polinsky, A Mitchell & Rubinfeld, Daniel L, 1988. "The Welfare Implications of Costly Litigation for the Level of Liability," The Journal of Legal Studies, University of Chicago Press, vol. 17(1), pages 151-64, January.
  6. Ringleb, Al H & Wiggins, Steven N, 1990. "Liability and Large-Scale, Long-term Hazards," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 574-95, June.
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Citations

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Cited by:
  1. Gérard Mondello, 2012. "Strict Liability, Capped Strict Liability, and Care Effort under Asymmetric Information," Post-Print hal-00727213, HAL.
  2. van 't Veld, Klaas & Hutchinson, Emma, 2009. "Excessive spending by firms to avoid accidents: Is it a concern in practice?," International Review of Law and Economics, Elsevier, vol. 29(4), pages 324-335, December.
  3. Giuseppe Dari Mattiacci & Gerrit De Geest, . "When Will Judgment Proof Injurers Take Too Much Precaution?," German Working Papers in Law and Economics 2002-1-1051, Berkeley Electronic Press.
  4. Gérard Mondello, 2010. "Risky Activities and Strict Liability Rules: Delegating Safety," Working Papers 2010.103, Fondazione Eni Enrico Mattei.
  5. G.G.A. de Geest & G. Dari Mattiacci, 2005. "Soft Regulators, though judges," Working Papers 05-06, Utrecht School of Economics.
  6. Tim Friehe, 2007. "A note on judgment proofness and risk aversion," European Journal of Law and Economics, Springer, vol. 24(2), pages 109-118, October.
  7. Juan José Ganuza & Fernando Gómez, 2003. "Optimal negligence rule under limited liability," Economics Working Papers 759, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2004.
  8. Thomas J. Miceli & Kathleen Segerson, 2004. "A Tort for Risk and Endogenous Bankruptcy," Working papers 2004-24, University of Connecticut, Department of Economics.
  9. Tim Friehe, 2011. "On being asset-constrained in litigation contests," Public Choice, Springer, vol. 147(3), pages 277-284, June.
  10. Tim Friehe, 2008. "On judgment proofness in the case of bilateral harm," European Journal of Law and Economics, Springer, vol. 26(2), pages 175-185, October.

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