Socially Optimal Liability Rules for Firms with Natural Monopoly
AbstractIt has been shown by Polinsky and Shavell that the strict liability rule is socially superior to the negligence liability rule when firms are injurers, strangers are victims, and accidents have a unilateral nature if prefect competition among firms prevails. This article considers the problem of socially efficient liability rules in a market where natural monopoly prevails due to decreasing average cost. We especially consider a quasi-competitive case where average cost pricing is achieved in a naturally monopolized market either through well-organized government regulation or the weak invisible hands of contestability. In contrast to the perfectly competitive economy, the present article shows that in most cases, the negligence regime is socially more desirable than the strict liability regime from the view point of economic efficiency.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0753.
Date of creation: Aug 2009
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-11 (All new papers)
- NEP-ENE-2009-09-11 (Energy Economics)
- NEP-IND-2009-09-11 (Industrial Organization)
- NEP-REG-2009-09-11 (Regulation)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fumiko Matsumoto).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.