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A Model of the Optimal Use of Liability and Safety Regulation

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Steven Shavell

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Abstract

A model of the occurrence of accidents is used to examine liability and safety regulation as means of controlling risks. According to the model, regulation does not result in the appropriate reduction of risk--because the regulator lacks perfect information--nor does liability result in that outcome--because the incentives it creates are diluted by the chance that parties would not be sued for harm done or would not be able to pay fully for it. Thus, neither liability nor regulation is necessarily better than the other, and as is stressed, their joint use is generally socially advantageous.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 15 (1984)
Issue (Month): 2 (Summer)
Pages: 271-280
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Handle: RePEc:rje:randje:v:15:y:1984:i:summer:p:271-280

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  1. Marcel Boyer & Donatella Porrini, 2002. "Modeling the Choice Between Regulation and Liability in Terms of Social Welfare," CIRANO Working Papers 2002s-13, CIRANO. [Downloadable!]
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  2. Edward L. Glaeser & Andrei Shleifer, 2001. "The Rise of the Regulatory State," NBER Working Papers 8650, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Ephraim Clark & Gérard Mondello, 2000. "Water Management in France: Delegation and Irreversibility," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 325-352, November. [Downloadable!]
  4. Sandrine SPAETER, 2002. "Principe de precaution et comportements preventifs des firmes face aux risques environnementaux," Working Papers of BETA 2002-08, Bureau d'Economie Théorique et Appliquée, ULP, Strasbourg. [Downloadable!]
  5. Juan-Jose Ganuza & Fernando Gomez, 2007. "Caution, Children Crossing: Heterogeneity of Victim's Cost of Care and the Negligence Rule," Review of Law & Economics, Berkeley Electronic Press, vol. 1(3), pages 3. [Downloadable!] (restricted)
  6. Francesco Parisi & Giuseppe Dari-Mattiacci, 2003. "The Economics of Tort Law: A Précis," Working Papers 03-13, Utrecht School of Economics. [Downloadable!]
  7. Dhammika Dharmapala & Sandra A. Hoffmann, 2002. "Bilateral Accidents with Intrinsically Interdependent Costs of Precaution," Working papers 2002-11, University of Connecticut, Department of Economics. [Downloadable!]
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  8. Schmitz, Patrick W., 1997. "Sollten Haftungsregeln durch Strafen ergänzt werden?," MPRA Paper 6937, University Library of Munich, Germany. [Downloadable!]
  9. Ephraim Clark & Gérard Mondello, 2000. "Resource Management and the Mayor's Guarantee in French Water Allocation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 15(2), pages 103-113, February. [Downloadable!] (restricted)
  10. González, Patrick, 2003. "Optimal Assignment of Liabilities," Cahiers de recherche 0305, GREEN. [Downloadable!]
  11. Giuseppe Dari-Mattiacci & Gerrit de Geest, 2003. "Judgement Proofness under Four Different Precaution Technologies," Working Papers 03-16, Utrecht School of Economics. [Downloadable!]
  12. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Claude Fluet, 1998. "Régulation des risques et insolvabilité: le rôle de la responsabilité pour faute en information imparfaite," Cahiers de recherche du Département des sciences économiques, UQAM 9802, Université du Québec à Montréal, Département des sciences économiques. [Downloadable!]
  14. HIRIART, Yolande & MARTIMORT, David & POUYET, Jérôme, 2004. "On the Optimal Use of Ex Ante Regulation and Ex Post Liability," IDEI Working Papers 274, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  15. Anthony Heyes, 1996. "Optimal taxation of flow pollutants when firms may also inflict catastrophic environmental damage," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 7(1), pages 1-14, January. [Downloadable!] (restricted)
  16. Ayla Ogus, 2005. "A Model of Endogeneous Oil Spill Regulation," Others 0504004, EconWPA. [Downloadable!]
  17. Paul Gordon & Alan E. Woodfield, 2006. "Ex Ante Liability Rules in New Zealand's Health and Safety in Employment Act: A Law and Economics Analysis," Working Papers in Economics 06/02, University of Canterbury, Department of Economics. [Downloadable!]
  18. Austin, David & Alberini, Anna, 1998. "Strict Liability as a Deterrent in Toxic Waste Management: Empirical Evidence from Accident and Spill Data," Discussion Papers dp-98-16, Resources For the Future. [Downloadable!]
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  19. Gerrit de Geest & Giuseppe Dari-Mattiacci, 2005. "Soft Regulators, Though Judges," Working Papers 05-06, Utrecht School of Economics. [Downloadable!]
  20. Pål Andreas Pedersen, 2001. "A Game Theoretical Approach to Road Safety," Studies in Economics 0105, Department of Economics, University of Kent. [Downloadable!]
  21. Hiriart, Yolande & Martimort, David & Pouyet, Jérôme, 2005. "The Public Management of Environmental Risk: Separating Ex Ante and Ex Post Monitors," CEPR Discussion Papers 4992, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  22. Boyd, James, 1996. "Banking on "Green Money:" Are Environmental Financial Responsibility Rules Fulfilling Their Promise?," Discussion Papers dp-96-26, Resources For the Future. [Downloadable!]
  23. Austin, David & Alberini, Anna, 2001. "Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases," Discussion Papers dp-01-06, Resources For the Future. [Downloadable!]
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  24. Jon Strand, 1994. "Environmental accidents under moral hazard and limited firm liability," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(5), pages 495-509, October. [Downloadable!] (restricted)
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