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Effects of Courts' Errors on Efficiency of Liability Rules: When Individuals are Imperfectly Informed

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  • Ram Singh

    (Delhi School of Economics)

Abstract

Efficiency property of liability rules when courts make errors in estimation of the harm suffered by the victim is studied. Effects of courts' errors on parties' behaviour regarding the levels of care they take to prevent the accident and their decisions to buy information about courts' errors are analyzed. A condition called negligent injurer's liability is introduced. When courts make upper-biased errors, condition negligent injurer's liability is shown to be necessary and sufficient for a simple liability rule to motivate the parties to take efficient care and simultaneously not to spend on information. The notion of simple liability rules is also introduced. Analysis is carried out in a quite broader framework. In particular, the standard assumption that costs of care and expected loss functions are such that total costs of accident are minimized at a unique configuration of care levels is relaxed.

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Bibliographic Info

Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 97.

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Length: 23 pages
Date of creation: Sep 2001
Date of revision:
Handle: RePEc:cde:cdewps:97

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Related research

Keywords: Courts' errors; liability rules; simple liability rules; total social costs; efficient liability rules; negligent injurer's liability; Nash equilibrium; imperfect information.;

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  1. Rasmusen, Eric, 1995. "Predictable and unpredictable error in tort awards: The effect of plaintiff self-selection and signaling," International Review of Law and Economics, Elsevier, vol. 15(3), pages 323-345, September.
  2. Kaplow, Louis, 1995. "A Model of the Optimal Complexity of Legal Rules," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(1), pages 150-63, April.
  3. Louis Kaplow & Steven Shavell, 1993. "Accuracy in the Assessment of Damages," NBER Working Papers 4287, National Bureau of Economic Research, Inc.
  4. Louis Kaplow, 1992. "A Model of the Optimal Complexity of Rules," NBER Working Papers 3958, National Bureau of Economic Research, Inc.
  5. Polinsky, A Mitchell & Shavell, Steven, 1989. "Legal Error, Litigation, and the Incentive to Obey the Law," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 99-108, Spring.
  6. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9483, National Bureau of Economic Research, Inc.
  7. Louis Kaplow & Steven Shavell, 1991. "Private Versus Socially Optimal Provision of Ex Ante Legal Advice," NBER Working Papers 3868, National Bureau of Economic Research, Inc.
  8. Miceli, Thomas J., 1997. "Economics of the Law: Torts, Contracts, Property, Litigation," OUP Catalogue, Oxford University Press, number 9780195103908.
  9. Kaplow, Louis & Shavell, Steven, 1994. "Accuracy in the Determination of Liability," Journal of Law and Economics, University of Chicago Press, vol. 37(1), pages 1-15, April.
  10. Kaplow, Louis, 1994. "The Value of Accuracy in Adjudication: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 307-401, January.
  11. Craswell, Richard & Calfee, John E, 1986. "Deterrence and Uncertain Legal Standards," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 279-303, Fall.
  12. Miceli, Thomas J, 1990. "Optimal Prosecution of Defendants Whose Guilt Is Uncertain," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(1), pages 189-201, Spring.
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