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The joint use of regulation and strict liability with multidimensional care and uncertain conviction

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  • Bhole, Bharat
  • Wagner, Jeffrey

Abstract

The purpose of this paper is to explore the joint use of regulation and strict liability when firms can take care in both observable and unobservable dimensions and when the firm's conviction for damages is uncertain. Much of the literature concerning joint use regards management of the judgment-proof problem; the take-home result of our paper is that if the harming party can take both observable and unobservable care, then joint use can improve welfare even in the absence of judgment-proofness. This is true even when penalty multipliers are allowed, provided social welfare is negatively related to the firm's expected liability costs. In fact, use of penalty multipliers further strengthens the case for joint use.

Suggested Citation

  • Bhole, Bharat & Wagner, Jeffrey, 2008. "The joint use of regulation and strict liability with multidimensional care and uncertain conviction," International Review of Law and Economics, Elsevier, vol. 28(2), pages 123-132, June.
  • Handle: RePEc:eee:irlaec:v:28:y:2008:i:2:p:123-132
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    References listed on IDEAS

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    Cited by:

    1. BOYER, Marcel & PORRINI, Donatella, 2010. "Optimal Liability Sharing and Court Errors : An Exploratory Analysis," Cahiers de recherche 05-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    2. Boyer, Marcel & Porrini, Donatella, 2011. "The impact of court errors on liability sharing and safety regulation for environmental/industrial accidents," International Review of Law and Economics, Elsevier, vol. 31(1), pages 21-29, March.
    3. Pierre Bentata, 2014. "Liability as a complement to environmental regulation: an empirical study of the French legal system," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(3), pages 201-228, July.
    4. Friehe, Tim & Langlais, Eric, 2015. "On the political economy of public safety investments," International Review of Law and Economics, Elsevier, vol. 41(C), pages 7-16.
    5. Reinshagen, Felix, 2011. "Standards and Incentives in Safety Regulation," Munich Dissertations in Economics 13430, University of Munich, Department of Economics.
    6. Bentata Pierre, 2013. "Environmental Regulation and Civil Liability Under Causal Uncertainty: An Empirical Study of the French Legal System," Review of Law & Economics, De Gruyter, vol. 9(2), pages 239-263, October.
    7. Pierre Bentata & Karim Barkat, 2012. "Environmental Liability and Regulation: An Empirical Study of the French Institutional Division of Labour," CAE Working Papers 98, Aix-Marseille Université, CERGAM.
    8. Reinshagen, Felix, 2012. "Standards and Incentives under Moral Hazard with Limited Liability," Discussion Papers in Economics 12750, University of Munich, Department of Economics.
    9. Grajzl, Peter & Baniak, Andrzej, 2009. "Industry self-regulation, subversion of public institutions, and social control of torts," International Review of Law and Economics, Elsevier, vol. 29(4), pages 360-374, December.
    10. 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.
    11. Michel, Stephan & Romano, Alessandro & Zannini, Ugo, 2017. "Joint Use of Liability and Regulation in Environmental Law," ILE Working Paper Series 5, University of Hamburg, Institute of Law and Economics.
    12. Calcott Paul, 2016. "Regulations to Supplement Weak Environmental Liability," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-14, October.
    13. Zachary Grzelka & Jeffrey Wagner, 2019. "Managing Satellite Debris in Low-Earth Orbit: Incentivizing Ex Ante Satellite Quality and Ex Post Take-Back Programs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 319-336, September.
    14. Massimo D’Antoni & Avraham D Tabbach, 2019. "The Complementary Role of Liability and Safety Regulation," American Law and Economics Review, Oxford University Press, vol. 21(1), pages 150-183.
    15. 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.

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