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A Tort for Risk and Endogenous Bankruptcy

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Author Info

  • Thomas J. Miceli

    (University of Connecticut)

  • Kathleen Segerson

    (University of Connecticut)

Abstract

Conventional tort law bars victims of exposure to a toxic substance from filing suit until they actually develop symptoms of illness. Practically speaking, this rule often bars recovery due to bankruptcy and causal uncertainty. One solution is to allow victims to file at exposure for expected damages (a tort for risk). The trade-off is that such a rule may trigger a race to file among exposure victims, thereby itself inducing bankruptcy. This paper characterizes the conditions under which such a race will occur in equilibrium and examines the implications for social welfare.

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File URL: http://www.econ.uconn.edu/working/2004-24.pdf
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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2004-24.

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Length: 25 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:uct:uconnp:2004-24

Note: We acknowledge the very useful comments of David Martimort and an anonymous referee.
Contact details of provider:
Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
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Related research

Keywords: Environmental accidents; mass torts; bankruptcy;

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References

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  1. Fischer, Michael J, 1996. "Union Carbide's Bhopal Incident: A Retrospective," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 257-69, May.
  2. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  3. Miceli, Thomas J. & Segerson, Kathleen, 2003. "A note on optimal care by wealth-constrained injurers," International Review of Law and Economics, Elsevier, vol. 23(3), pages 273-284, September.
  4. Rose-Ackerman, Susan, 1989. "Dikes, Dams, and Vicious Hogs: Entitlement and Efficiency in Tort Law," The Journal of Legal Studies, University of Chicago Press, vol. 18(1), pages 25-50, January.
  5. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
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Cited by:
  1. Thomas J. Miceli & Kathleen Segerson, 2004. "Do Exposure Suits Produce a "Race to File"? An Economic Analysis of a Tort for Risk," Working papers 2004-25, University of Connecticut, Department of Economics.

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