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Damages Regimes, Precaution Incentives, and the Intensity Principle

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  • Urs Schweizer

Abstract

This paper revisits the accident model at its roots and shows that the intensity principle provides a powerful analytical tool to handle a variety of issues in a unifying frame and based on common intuition. If courts impose inefficient standards, if a cap on liability exists, or if the principal must pay an information rent to induce precaution, the exact method of quantifying damages matters. The intensity principle allows comparing the intensity of precaution incentives under different damages regimes, such as strict liability, proportional liability, and the negligence rule. Moreover, it requires less restrictive assumptions than the more traditional approach.

Suggested Citation

  • Urs Schweizer, 2013. "Damages Regimes, Precaution Incentives, and the Intensity Principle," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(4), pages 567-586, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201312)169:4_567:drpiat_2.0.tx_2-v
    DOI: 10.1628/093245613X671247
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    References listed on IDEAS

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    1. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
    2. Demougin, Dominique & Fluet, Claude, 1999. "A further justification for the negligence rule," International Review of Law and Economics, Elsevier, vol. 19(1), pages 33-45, March.
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    Cited by:

    1. Schweizer, Urs, 2015. "Incentives to Acquire Information under Mandatory versus Voluntary Disclosure," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112868, Verein für Socialpolitik / German Economic Association.
    2. Dawid, Herbert & Muehlheusser, Gerd, 2022. "Smart products: Liability, investments in product safety, and the timing of market introduction," Journal of Economic Dynamics and Control, Elsevier, vol. 134(C).

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    More about this item

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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