IDEAS home Printed from https://ideas.repec.org/a/bpj/ajlecn/v7y2016i3p279-303n5.html

Eliciting Multi-Dimensional Care through Liability and Regulation

Author

Listed:
  • Che Yeon-Koo

    (Department of Economics, Columbia University, New York, NY, USA)

Abstract

This paper examines the incentive performance of liability and regulation when a potential injurer can take two types of preventative care, one of which is observed and one of which is not. The problem is studied in a general asymmetric information model, where settlement behavior is endogenous and which incorporates an uncertain legal standard. Contrary to existing literature, we find (1) a shift to a negligence rule may have a perverse effect on unobserved care; (2) uncertainty in legal standards may be socially beneficial as it provides a relatively good incentive for unobserved care; (3) a regulation may not be effective if preventative care efforts are substitutes but is effective if they are complements; (4) an increase in settlement rate may or may not increase the level of care, depending on the cause of the increase; (5) a “decoupling” arrangement with a feature that the defendant pays more than the plaintiff recovers, reduces legal costs and is therefore socially beneficial.

Suggested Citation

  • Che Yeon-Koo, 2016. "Eliciting Multi-Dimensional Care through Liability and Regulation," Asian Journal of Law and Economics, De Gruyter, vol. 7(3), pages 279-303, December.
    • Handle: RePEc:bpj:ajlecn:v:7:y:2016:i:3:p:279-303:n:5
    DOI: 10.1515/ajle-2016-0029
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/ajle-2016-0029
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/ajle-2016-0029?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. A. Mitchell Polinsky, 1986. "Detrebling versus Decoupling Antitrust Damages: Lessons from the Theory of Enforcement," NBER Working Papers 1846, National Bureau of Economic Research, Inc.
    2. Steven Shavell, 1984. "A Model of the Optimal Use of Liability and Safety Regulation," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 271-280, Summer.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Miceli Thomas J. & Segerson Kathleen, 2013. "Liability versus Regulation for Dangerous Products When Consumers Vary in Their Susceptibility to Harm and May Misperceive Risk," Review of Law & Economics, De Gruyter, vol. 9(3), pages 341-355, December.
    2. Pål Andreas Pedersen, 2001. "A Game Theoretical Approach to Road Safety," Studies in Economics 0105, School of Economics, University of Kent.
    3. Julien Jacob & Caroline Orset, 2020. "Innovation, information, lobby and tort law under uncertainty," Working Papers of BETA 2020-25, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Suurmond, Guido, 2007. "The effects of the enforcement strategy," MPRA Paper 21142, University Library of Munich, Germany.
    5. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2018. "Deceptive Advertising with Rational Buyers," Management Science, INFORMS, vol. 64(3), pages 1291-1310, March.
    6. Siebert, Horst, 1989. "Liability issues in pollution control," Kiel Working Papers 350, Kiel Institute for the World Economy.
    7. Kerr, Suzi, 2013. "Managing Risks and Tradeoffs Using Water Markets," Motu Working Papers 291380, Motu Economic and Public Policy Research.
    8. Müller, Daniel & Schmitz, Patrick W., 2015. "Overdeterrence of repeat offenders when penalties for first-time offenders are restricted," Economics Letters, Elsevier, vol. 129(C), pages 116-120.
    9. Andrzej Baniak & Peter Grajzl, 2016. "Controlling Product Risks when Consumers Are Heterogeneously Overconfident: Producer Liability versus Minimum-Quality-Standard Regulation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(2), pages 274-304, June.
    10. Marion Desquilbet & Sylvaine Poret, 2014. "How do GM/non GM coexistence regulations affect markets and welfare?," European Journal of Law and Economics, Springer, vol. 37(1), pages 51-82, February.
    11. Dionne, Georges & Gagne, Robert & Gagnon, Francois & Vanasse, Charles, 1997. "Debt, moral hazard and airline safety An empirical evidence," Journal of Econometrics, Elsevier, vol. 79(2), pages 379-402, August.
    12. Gérard Mondello, 2012. "Strict Liability, Capped Strict Liability, and Care Effort under Asymmetric Information," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(2), pages 232-251, June.
    13. Gérard Mondello, 2013. "Ambiguous Beliefs on Damages and Civil Liability Theories"," Post-Print halshs-00929948, HAL.
    14. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    15. Lin, Shi-Woei, 2010. "Self-reporting mechanism for risk regulation," Journal of Business Research, Elsevier, vol. 63(5), pages 528-534, May.
    16. Andrzej Baniak & Peter Grajzl, 2014. "Controlling Product Risks when Consumers are Heterogeneously Overconfident: Producer Liability vs. Minimum Quality Standard Regulation," CESifo Working Paper Series 5003, CESifo.
    17. Sunding, David L. & Zilberman, David, 1998. "Allocating Product Liability in a Multimarket Setting," International Review of Law and Economics, Elsevier, vol. 18(1), pages 1-11, March.
    18. Gérard Mondello, 2022. "Strict liability, scarce generic input and duopoly competition," European Journal of Law and Economics, Springer, vol. 54(3), pages 369-404, December.
    19. Sébastien Pouliot & Daniel A. Sumner, 2008. "Traceability, Liability, and Incentives for Food Safety and Quality," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 15-27.
    20. Thomas J. Miceli & Rebecca Rabon & Kathleen Segerson, 2012. "Liability versus Regulation for Dangerous Products When Consumers Vary in Their Susceptibility to Harm and Misperceive Risk," Working papers 2012-15, University of Connecticut, Department of Economics.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:ajlecn:v:7:y:2016:i:3:p:279-303:n:5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyterbrill.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.