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Tortious Acts Affecting Markets

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Author Info
Urs Schweizer (Department of Economics, University of Bonn, Adenauerallee 24, D-53113 Bonn, Germany. schweizer@uni-bonn.de)
Abstract

The present paper examines an injurer causing a temporary blackout to a firm as the primary victim but also affecting customers and competitors of the firm. Reflecting existing legal practice, the paper investigates efficiency properties of the negligence rule granting recovery of private losses but to the primary victim only. The regime is shown to provide efficient incentives for precaution provided that the primary loss exceeds the social loss from accidents. The main contribution of the paper consists of an explicit analysis of markets affected by a temporary blackout of one firm. The analysis reveals that the private loss exceeds the social loss indeed if the market is less than fully competitive. Moreover, the net social loss remains positive, no matter which market structure prevails.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 106.

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Date of creation: Apr 2006
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Handle: RePEc:trf:wpaper:106

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Find related papers by JEL classification:
K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability
K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
D62 - Microeconomics - - Welfare Economics - - - Externalities

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kahan, Marcel, 1989. "Causation and Incentives to Take Care under the Negligence Rule," Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 427-47, June.
  2. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Giuseppe Dari Mattiacci, . "The Economics Of Pure Economic Loss And The Internalisation Of Multiple Externalities," German Working Papers in Law and Economics 2003-1-1053, Berkeley Electronic Press. [Downloadable!]
  4. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring. [Downloadable!] (restricted)
  5. Gilead, Israel, 1997. "Tort law and internalization: The gap between private loss and social cost," International Review of Law and Economics, Elsevier, vol. 17(4), pages 589-608, December. [Downloadable!] (restricted)
  6. Schweizer, Urs, 2005. "Law and Economics of Obligations," International Review of Law and Economics, Elsevier, vol. 25(2), pages 209-228, June. [Downloadable!] (restricted)
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This page was last updated on 2009-12-16.

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