Customary versus technological advancement tests
In an environment where the optimal level of care is unknown, we ask, under a state-of-the-art defense, which method is better able to induce parties to undertake optimal care. Assuming courts can see a noisy signal of research activities undertaken by a defendant and by some of its competitors, we ask whether courts should use a biased or an unbiased average to compare care. We find that the latter is advantageous.
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- Paul R. Milgrom, 1981.
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0401, National Bureau of Economic Research, Inc.
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