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Efficient liability rules for multi-party accidents with moral hazard

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Author Info

  • Hege, U.

    (Tilburg University)

  • Feess, E.

Abstract

The economic analysis of tort law is extended to multi-party accidents with unobservable actions. Due to the requirement of no punitive damages, the problem resembles a team production problem. It is shown that asymmetry in the agents' impact on the stochastic damage function can be exploited to improve ex ante incentives. This implies departures from the proportional rule, based on the statistical information contained in the circumstances of the accident. If a noisy monitoring technology is introduced, then monitoring can add enough stochastic identifiability among injurers to restore efficiency.

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-78736.

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Date of creation: 1998
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Publication status: Published in Journal of Institutional and Theoretical Economics (1998) v.154, p.422-450
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-78736

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Web page: http://www.tilburguniversity.edu/

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Cited by:
  1. Gonz�lez, Patrick, 2003. "Optimal Assignment of Liabilities," Cahiers de recherche 0305, GREEN.
  2. Marx, Leslie M. & Squintani, Francesco, 2009. "Individual accountability in teams," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 260-273, October.
  3. Endres, Alfred & Bertram, Regina, 2006. "The development of care technology under liability law," International Review of Law and Economics, Elsevier, vol. 26(4), pages 503-518, December.

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