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The conceivable scope of negligence rules for internalizing multidirectional externalities

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  • Schweizer, Urs

Abstract

In this paper, a game-theoretic setting with transferable utility serves to explore the scope of damages rules for internalizing multidirectional external effects. From the legal perspective, damages rules aim at compensating victims for the wrongdoing of others (compensation requirement). Yet, to be held liable, it must be an agent’s wrongdoing that has caused harm to the victim (causation requirement). The two requirements can be at conflict when causation is meant in the sense of the but-for test. The paper proposes a causation test that resolves this conflict quite generally. It combines the legal idea of the NESS test with the Shapley value of a suitable characteristic function. The resulting damages rules fully internalize externalities even if they are of multidirectional nature.

Suggested Citation

  • Schweizer, Urs, 2026. "The conceivable scope of negligence rules for internalizing multidirectional externalities," Mathematical Social Sciences, Elsevier, vol. 140(C).
    • Handle: RePEc:eee:matsoc:v:140:y:2026:i:c:s0165489625001088
    DOI: 10.1016/j.mathsocsci.2025.102493
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    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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