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A further justification for the negligence rule

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  • Demougin, Dominique
  • Fluet, Claude

Abstract

We use a principal-agent framework to reexamine the implications of the negligence and strict liability rules when the tort-feasor is an agency. We assume a unilateral care situation and consider both the cases of moral hazard and of adverse selection. In both instances the negligence rule is shown to Pareto dominate the strict liability rule when the activity level is exogenously given. We find a simple condition which guarantees that the result extends to an endogenous activity level. We also examine the case where this condition is not satisfied.
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Suggested Citation

  • Demougin, Dominique & Fluet, Claude, 1999. "A further justification for the negligence rule," International Review of Law and Economics, Elsevier, vol. 19(1), pages 33-45, March.
  • Handle: RePEc:eee:irlaec:v:19:y:1999:i:1:p:33-45
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    Cited by:

    1. Gérard Mondello, 2012. "The Equivalence of Strict Liability and Negligence Rule: A " Trompe l'œil " Perspective," Post-Print hal-00727223, HAL.
    2. Zivin, Joshua Graff & Just, Richard E. & Zilberman, David, 2005. "Risk Aversion, Liability Rules, and Safety," International Review of Law and Economics, Elsevier, vol. 25(4), pages 604-623, December.
    3. Henry van Egteren & R. Smith & Dean McAfee, 2004. "Harmonization of Environmental Regulations When Firms are Judgment Proof," European Journal of Law and Economics, Springer, vol. 17(2), pages 139-164, March.
    4. Schweizer, Urs, 2011. "Vicarious Liability and the Intensity Principle," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 364, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    5. Urs Schweizer, 2013. "Damages Regimes, Precaution Incentives, and the Intensity Principle," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(4), pages 567-586, December.
    6. Bisso, Juan Carlos & Choi, Albert H., 2008. "Optimal agency contracts: The effect of vicarious liability and judicial error," International Review of Law and Economics, Elsevier, vol. 28(3), pages 166-174, September.
    7. Feess, Eberhard & Hege, Ulrich, 2003. "Safety monitoring, capital structure, and "financial responsibility"," International Review of Law and Economics, Elsevier, vol. 23(3), pages 323-339, September.
    8. Mondello, Gérard, 2012. "La responsabilité environnementale des prêteurs : difficultés juridiques et ensemble des possibles," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(2), pages 257-278, Juin.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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