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Judgment Proofness and the Choice between Monetary and Nonmonetary Care

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  • Tim Friehe
  • Avraham Tabbach

Abstract

This paper studies a unilateral accident model in which potentially judgment-proof agents (agents who may have insufficient assets to satisfy a judgment against them) choose levels of both monetary and nonmonetary care. We show that (i) monetary care may exceed its first-best level under both strict liability and negligence, (ii) social costs may be lowered by the incentive effects resulting from the monetary nature of care, (iii) an increase in the assets of potentially judgment-proof injurers may increase social costs, and (iv) one second-best due-care standard may be in excess of the efficient care level.

Suggested Citation

  • Tim Friehe & Avraham Tabbach, 2014. "Judgment Proofness and the Choice between Monetary and Nonmonetary Care," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(2), pages 249-274, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201406)170:2_249:jpatcb_2.0.tx_2-4
    DOI: 10.1628/093245613X13783876326544
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    References listed on IDEAS

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    1. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
    2. Dari-Mattiacci Giuseppe, 2006. "On the Optimal Scope of Negligence," Review of Law & Economics, De Gruyter, vol. 1(3), pages 331-364, January.
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    Cited by:

    1. 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.
    2. Tim Friehe & Christoph Rössler & Elisabeth Schulte, 2023. "Probing the case for manufacturer liability for harms caused by judgment-proof consumers to others," European Journal of Law and Economics, Springer, vol. 56(3), pages 443-460, December.

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    More about this item

    JEL classification:

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

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