Insolvency and Biased Standards - The Case for Proportional Liability
AbstractWe analyze liability rules in a setting where injurers are potentially insolvent and where negligence standards may deviate from the socially optimal level. We show that proportional liability, which sets the measure of damages equal to the harm multiplied by the probability that it was caused by an injurerâ€™s negligence, is preferable to other existing negligence-based rules. Moreover, proportional liability outperforms strict liability if the standard of due care is not set too low. Our analysis also suggests that courts should rely on statistical evidence and bar individualized causal claims that link the harm suffered by a plaintiff to the actions of the defendant. Finally, we provide a result which might be useful to regulators when calculating minimum capital requirements or minimum mandatory insurance for different industries.
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Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 289.
Date of creation: Dec 2009
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judgment proof problem; uncertain causation; court error and misperception; proportional liability; disgorgement;
Other versions of this item:
- Stremitzer, Alexander & Tabbach, Avraham, 2009. "Insolvency and Biased Standards--The Case for Proportional Liability," Working Papers 75, Yale University, Department of Economics.
- Stremitzer, Alexander & Tabbach, Avraham, 2009. "Insolvency and Biased Standards--The Case for Proportional Liability," Working Papers 75r, Yale University, Department of Economics.
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-19 (All new papers)
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