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Laws and norms: Experimental evidence with liability rules

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  • Deffains, Bruno
  • Espinosa, Romain
  • Fluet, Claude

Abstract

We conduct an experiment where participants choose between actions that provide private benefits but may also impose losses on others. Three legal environments are compared: no law, strict liability for harm caused to third parties, and an efficiently designed negligence rule where damages are paid only when the harmful action generates a net social loss. Legal obligations are either perfectly enforced (Severe Law) or only weakly so (Mild Law), i.e., expected sanctions are then nondeterrent. We find that behavior can be rationalized in terms of individuals trading-off private benefits, net of legal liability, against the net uncompensated losses caused to others. The weight associated with non-incentivized efficiency concerns is increased by the introduction of a liability rule, whether deterrent or not, and there is evidence that the effect is stronger under strict liability than under the negligence rule.

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  • Deffains, Bruno & Espinosa, Romain & Fluet, Claude, 2019. "Laws and norms: Experimental evidence with liability rules," International Review of Law and Economics, Elsevier, vol. 60(C).
  • Handle: RePEc:eee:irlaec:v:60:y:2019:i:c:s0144818819300225
    DOI: 10.1016/j.irle.2019.105858
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    Cited by:

    1. Christoph Rössler & Tim Friehe, 2020. "Liability, morality, and image concerns in product accidents with third parties," European Journal of Law and Economics, Springer, vol. 50(2), pages 295-312, October.
    2. Gianna Lotito & Matteo Migheli & Guido Ortona, 2020. "Transparency, asymmetric information and cooperation," European Journal of Law and Economics, Springer, vol. 50(2), pages 267-294, October.

    More about this item

    Keywords

    Behavioral law and economics; Liability rules; Social norms; Social preferences; Legal norms;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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