The inefficiency of decoupling
AbstractThe scope of this paper is to demonstrate that only in case of unilateral accident a party will take efficient level of activity. In all cases of bilateral accidents there will be aòwaus a party that will take a too high level of activity. But the reason that I try to demonstrate in this work is not that one party does not consider the expected damage, but instead the also the party that has an interest to consider the expected damage will take a too high level of activity (i.e. even if the expected damage is part of her private costs). The reason why that happens is that, in case of strict liability for the injurer with a defence he will not take account of the precaution costs of the victim, and in any case of a regime of negligence the victim will not consider in her cost-benefit analysis the precaution costs of the injurer. The consequence of that is a level of activity which is inefficient for a different reason with respect to that well known: that is the fact that a party does not bear the expected damage. I accept this known solution but I underpin another problem. The conclusion is that also decoupling does not produce an efficient consequence and that the search of tort efficient rules is still more difficult.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 38884.
Date of creation: Apr 2012
Date of revision:
Inefficient Decoupling; excessive activity Level; Precuatoray Externalities: Pigouvian Tax;
Find related papers by JEL classification:
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- K19 - Law and Economics - - Basic Areas of Law - - - Other
- K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-29 (All new papers)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.