Variable Probabilities of Suit and Liability Rules
AbstractThis note provides an additional argument in favour of the use of a negligence rule in tort law. When the probability of suit varies among injurers and is not observable by the judge, the judge will fail to implement the socially optimal level of care using a strict liability rule (for this implies to set damages equal to harm multiplied by the inverse of the probability of suit). However, he can still implement it using a negligence rule, subject to the condition that he chooses the negligence standard properly (for if damages are set large enough, potential injurers will comply with the standard, regardless their probability of suit).
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Date of creation: 2008
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Liability; asymmetric information;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-20 (All new papers)
- NEP-CTA-2008-07-20 (Contract Theory & Applications)
- NEP-LAW-2008-07-20 (Law & Economics)
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.:
- Schmitz, Patrick W., 2000.
"On the Joint Use of Liability and Safety Regulation,"
12536, University Library of Munich, Germany.
- Schmitz, Patrick W., 2000. "On the joint use of liability and safety regulation," International Review of Law and Economics, Elsevier, vol. 20(3), pages 371-382, September.
- Louis Kaplow & Steven Shavell, 1999.
"Economic Analysis of Law,"
NBER Working Papers
6960, National Bureau of Economic Research, Inc.
- Bebchuk, Lucian Arye & Kaplow, Louis, 1993. "Optimal sanctions and differences in individuals' likelihood of avoiding detection," International Review of Law and Economics, Elsevier, vol. 13(2), pages 217-224, June.
- Rouillon, Sebastien, 2008. "Safety regulation vs. liability with heterogeneous probabilities of suit," International Review of Law and Economics, Elsevier, vol. 28(2), pages 133-139, June.
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