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Law and Economics of Obligations

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  • Urs Schweizer
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    Abstract

    While 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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    File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse2_2004.pdf
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    Bibliographic Info

    Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse2_2004.

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    Length: 28
    Date of creation: Feb 2004
    Date of revision:
    Handle: RePEc:bon:bonedp:bgse2_2004

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    Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
    Fax: +49 228 73 6884
    Web page: http://www.bgse.uni-bonn.de

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    Keywords: tort law; contract law; economic analysis of law;

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    1. Aaron S. Edlin & Stefan Reichelstein, 1995. "Holdups, Standard Breach Remedies, and Optimal Investment," NBER Working Papers 5007, National Bureau of Economic Research, Inc.
    2. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
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