Law and Economics of Obligations
AbstractWhile various liability rules of tort law provide efficient incentives to invest, breach remedies of contract law are claimed to be distortive. Since, at least in Germany, obligations law provides general rules for both contractual and tort relationships such discrepancy seems puzzling. The paper identifies a saddle point property as the driving force behind most efficiency results and it establishes that fault rules of a general type generate this property. The model is then confronted with important legal rules of the German law of obligations. The alleged inefficiency of expectation damages turns out to rest, not on a failure of breach remedies, but on the binary nature of delivery choice as imposed by the traditional analysis of contract law.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse2_2004.
Date of creation: Feb 2004
Date of revision:
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tort law; contract law; economic analysis of law;
Find related papers by JEL classification:
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- D62 - Microeconomics - - Welfare Economics - - - Externalities
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.:
- Edlin, Aaron S & Reichelstein, Stefan, 1996.
"Holdups, Standard Breach Remedies, and Optimal Investment,"
American Economic Review,
American Economic Association, vol. 86(3), pages 478-501, June.
- Aaron S. Edlin & Stefan Reichelstein, 1997. "Holdups, Standard Breach Remedies, and Optimal Investment," NBER Working Papers 5007, National Bureau of Economic Research, Inc.
- Steven Shavell, 2003.
"Economic Analysis of Accident Law,"
NBER Working Papers
9483, National Bureau of Economic Research, Inc.
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