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A Fundamental Enforcement Cost Advantage of the Negligence Rule over Regulation

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  • Steven Shavell

Abstract

Regulation and the negligence rule are both designed to obtain compliance with desired standards of behavior, but they differ in a primary respect: compliance with regulation is ordinarily assessed independently of the occurrence of harm, whereas compliance with the negligence rule is evaluated only if harm occurs. It is shown in a stylized model that because the use of the negligence rule is triggered by harm, the rule enjoys an intrinsic enforcement cost advantage over regulation. Moreover, this advantage suggests that the examination of behavior under the negligence rule should tend to be more detailed than under regulation (as it is).

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18418.

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Date of creation: Sep 2012
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Handle: RePEc:nbr:nberwo:18418

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  1. Steven Shavell, 1984. "A Model of the Optimal Use of Liability and Safety Regulation," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 271-280, Summer.
  2. Steven Shavell, 2011. "Corrective Taxation versus Liability," American Economic Review, American Economic Association, vol. 101(3), pages 273-76, May.
  3. Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
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Cited by:
  1. Baumann, Florian & Heine, Klaus, 2012. "Innovation, tort law, and competition," DICE Discussion Papers 78, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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