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The Compensation Regime in Liability Law: Incentives to Curb Environmental Harm, Ex Ante and Ex Post

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  • Alfred Endres
  • Tim Friehe

Abstract

This paper analyzes private incentives for precautions against environmental harm before accidents occur and for clean-up after the fact. We consider the compensatory regimes used in various jurisdictions, which differ in terms of the basis for compensation (the level of harm, clean-up costs, or some combination of the two) and the resulting levels of compensation. We establish that socially optimal decisions are usually not induced by liability law in any of the compensatory regimes. However, the different types and levels of compensation have distinct effects, allowing the policy maker to identify the most appropriate regime for specific circumstances. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Alfred Endres & Tim Friehe, 2015. "The Compensation Regime in Liability Law: Incentives to Curb Environmental Harm, Ex Ante and Ex Post," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 105-123, September.
    • Handle: RePEc:kap:enreec:v:62:y:2015:i:1:p:105-123
    DOI: 10.1007/s10640-014-9817-5
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    Cited by:

    1. Acocella, Nicola & Di Giovanni, Tomasz, 2019. "Natural Resources and Environment Preservation: Strategic Substitutability vs. Complementarity in Global and Local Public Good Provision," International Review of Environmental and Resource Economics, now publishers, vol. 13(3-4), pages 203-227, September.
    2. Tim Friehe & Eric Langlais & Elisabeth Schulte, 2022. "Firm Liability When Third Parties and Consumers Incur Cumulative Harm," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(1), pages 53-71, January.
    3. Michael Finus & Bianca Rundshagen, 2015. "Game Theory and Environmental and Resource Economics–In Honour of Alfred Endres," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 657-664, December.

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