Excessive spending by firms to avoid accidents: Is it a concern in practice?
Shavell's [Shavell, S. (1986). The judgment proof problem. International Review of Law and Economics, 6, 45-58] original model of the judgment proof problem treats costs of care to prevent accidents as non-monetary. Noting that this is unrealistic when injurers are firms, several authors have found that with monetary care costs, some judgment-proof firms perversely take excess rather than insufficient care. In this paper, we make explicit the quite specific assumptions required for the excess-care result to arise even in theory, and demonstrate that, even under these assumptions, the result is likely to be quantitatively unimportant. We also suggest an alternative model that, while treating care costs as monetary, avoids the excess-care result.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Boyer, M. & Laffont, J.J., 1995.
"Environmental Risks and Bank Liability,"
Cahiers de recherche
9501, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Boyer, M. & Laffont, J.J., 1995. "Environmental Risks and Bank Liability," Cahiers de recherche 9501, Universite de Montreal, Departement de sciences economiques.
- Boyer, Marcel & Laffont, Jean-Jacques, 1994. "Environmental Risks and Bank Liability," IDEI Working Papers 45, Institut d'Économie Industrielle (IDEI), Toulouse.
- Marcel Boyer & Jean-Jacques Laffont, 1994. "Environmental Risks and Bank Liability," CIRANO Working Papers 94s-22, CIRANO.
- Austin, David & Alberini, Anna, 1999.
"Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases,"
dp-99-29, Resources For the Future.
- Anna Alberini & David Austin, 2002. "Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 729-741, November.
- Austin, David & Alberini, Anna, 2001. "Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases," Discussion Papers dp-01-06, Resources For the Future.
- Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
- T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
- Pitchford, Rohan, 1995. "How Liable Should a Lender Be? The Case of Judgment-Proof Firms and Environmental Risk," American Economic Review, American Economic Association, vol. 85(5), pages 1171-86, December.
- Ulrich Hege & Eberhard Feess, 2000.
"Environmental Harm and Financial Responsibility,"
- Schmitz, Patrick W., 2000.
"On the Joint Use of Liability and Safety Regulation,"
12536, University Library of Munich, Germany.
- Schmitz, Patrick W., 2000. "On the joint use of liability and safety regulation," International Review of Law and Economics, Elsevier, vol. 20(3), pages 371-382, September.
- Lewis, Tracy R. & Sappington, David E. M., 1999. "Using decoupling and deep pockets to mitigate judgment-proof problems1," International Review of Law and Economics, Elsevier, vol. 19(2), pages 275-293, June.
- Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
- Thomas J. Miceli & Kathleen Segerson, 2001.
"A Note on Optimal Care by Wealth-Constrained Injurers,"
2002-44, University of Connecticut, Department of Economics, revised May 2002.
- 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.
- van 't Veld, Klaas, 2006. "Hazardous-industry restructuring to avoid liability for accidents," International Review of Law and Economics, Elsevier, vol. 26(3), pages 297-322, September.
- Posey, Lisa Lipowski, 1993. "Limited liability and incentives when firms can inflict damages greater than net worth," International Review of Law and Economics, Elsevier, vol. 13(3), pages 325-330, September.
- G. Dari Mattiacci & G.G.A. de Geest, 2004.
"When Will Judgment Proof Injurers Take Too Much Precaution?,"
04-27, Utrecht School of Economics.
- Dari-Mattiacci, Giuseppe & De Geest, Gerrit, 2006. "When will judgment proof injurers take too much precaution?," International Review of Law and Economics, Elsevier, vol. 26(3), pages 336-354, September.
- Giuseppe Dari Mattiacci & Gerrit De Geest, . "When Will Judgment Proof Injurers Take Too Much Precaution?," German Working Papers in Law and Economics 2002-1-1051, Berkeley Electronic Press.
- Randall K. Filer & Devra L. Golbe, 2003. "Debt, Operating Margin, and Investment In Workplace Safety," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 359-381, 09.
- Innes, Robert, 1999. "Optimal liability with stochastic harms, judgement-proof injurers, and asymmetric information1," International Review of Law and Economics, Elsevier, vol. 19(2), pages 181-203, June.
- Strand, J., 1992.
"Environmental Accidents Under Moral Hazard and Limited Firm Liability,"
22/1992, Oslo University, Department of Economics.
- Jon Strand, 1994. "Environmental accidents under moral hazard and limited firm liability," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(5), pages 495-509, October.
- Giuseppe Dari-Mattiacci & Gerrit De Geest, 2005.
"Judgment Proofness under Four Different Precaution Technologies,"
Journal of Institutional and Theoretical Economics (JITE),
Mohr Siebeck, Tübingen, vol. 161(1), pages 38-, March.
- Guiseppe Dari Mattiaci & G.G.A. de Geest, 2003. "Judgement Proofness under Four Different Precaution Technologies," Working Papers 03-16, Utrecht School of Economics.
- Craig, Ben & Thiel, Stuart E., 1990. "Large risks and the decision to incorporate," Journal of Economics and Business, Elsevier, vol. 42(3), pages 185-194, August.
- Richard MacMinn, 2002. "On the Judgment Proof Problem," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 27(2), pages 143-152, December.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Hutchinson, Emma & van 't Veld, Klaas, 2005. "Extended liability for environmental accidents: what you see is what you get," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 157-173, January.
- Eberhard Feess & Ulrich Hege, 2000. "Environmental Harm and Financial Responsibility*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 25(2), pages 220-234, April.
When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:29:y:2009:i:4:p:324-335. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.