Optimal Assignment of Liabilities
AbstractI characterize a generalization of the negligence rule to assign compensating damages in an accident involving multiple tortfeasors. These tortfeasors have the opportunity to undertake spending in prevention and the rule is designed to provide them with the best incentives to do so. I study the case where liability is constraint in the sense that the optimal amount of effort (not constrained by liability) cannot be implemented. The optimal multi-player rule is to apply the negligence rule to the most liable player (the "deep-pocket" or the "victim", defined as the player who is the most responsive to monetary incentives under the strict liability rule) and the strict liability rule to everybody else.
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Bibliographic InfoPaper provided by Université Laval - Département d'économique in its series Cahiers de recherche with number 0305.
Date of creation: 2003
Date of revision:
Negligence rule; limited liability; multiple tortfeasors;
Find related papers by JEL classification:
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability
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