Strict Liability, Capped Strict Liability, and Care Effort under Asymmetric Information
AbstractThis paper compares the effectiveness of strict liability and capped strict liability regimes in an agency relationship among a regulatory agency and operators of risky activities. Under a double asymmetric information assumption (wealth and efficiency in care effort), it shows that capping liability is more efficient than keeping with strict liability, this at the price of an informational rent. Efficiency means that the efficient agent supplies the level of safety effort equivalent to the first best solution one. At the optimum, this rent is minimized by the efficient contract supplied by the principal.
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Date of creation: 2012
Date of revision:
Publication status: Published, Journal of Institutional and Theoretical Economics, 2012, 168, 2, pp. 232-251(20)
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strict liability; capped liability; risk; Asymmetric information; agency relationships;
Other versions of this item:
- Gérard Mondello, 2012. "Strict Liability, Capped Strict Liability, and Care Effort under Asymmetric Information," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(2), pages 232-251, June.
- K0 - Law and Economics - - General
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
- Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
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