Safety regulation vs. liability with heterogeneous probabilities of suit
AbstractThis article deals with the regulation of activities that entail risk by means of regulatory standard and liability. The original assumption is that the probability that parties might escape liability is variable among the population. The use of each instrument separately is first considered. Under liability, the optimal damages are calculated. From this, it is shown that regulation is superior to liability if harm is not too variable within the population and if the probability of suit is sufficiently variable within the population, and conversely. The use of both instruments at the same time is then analyzed. The optimal combination of a safety standard and a liability schedule is derived. From this, it is proved that a joint use of regulation and liability is always optimal and that the instruments should be designed in a less stringent manner when used jointly.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal International Review of Law and Economics.
Volume (Year): 28 (2008)
Issue (Month): 2 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/irle
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Louis Kaplow & Steven Shavell, 1999.
"Economic Analysis of Law,"
NBER Working Papers
6960, National Bureau of Economic Research, Inc.
- Schmitz, Patrick W., 2000.
"On the joint use of liability and safety regulation,"
International Review of Law and Economics,
Elsevier, vol. 20(3), pages 371-382, September.
- Schmitz, Patrick W., 2000. "On the Joint Use of Liability and Safety Regulation," MPRA Paper 12536, University Library of Munich, Germany.
- Sébastien ROUILLON (GREThA), 2008. "Variable Probabilities of Suit and Liability Rules," Cahiers du GREThA 2008-15, Groupe de Recherche en Economie Théorique et Appliquée.
- Robert D. Cooter, 1991. "Economic Theories of Legal Liability," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 11-30, Summer.
- Grajzl, Peter & Baniak, Andrzej, 2009. "Industry self-regulation, subversion of public institutions, and social control of torts," International Review of Law and Economics, Elsevier, vol. 29(4), pages 360-374, December.
- Reinshagen, Felix, 2011. "Standards and Incentives in Safety Regulation," Munich Dissertations in Economics 13430, University of Munich, Department of Economics.
- Tim Friehe & Eric Langlais, 2014. "On the Political Economy of Public Safety Investments," EconomiX Working Papers 2014-8, University of Paris West - Nanterre la Défense, EconomiX.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.