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The Double Liability Rule*

Author

Listed:
  • Jörg Finsinger

    (University of Hohenheim, Stuttgart)

  • Mark V. Pauly

    (University of Pennsylvania)

Abstract

Conventional liability rules do not lead to a first best allocation. Optimal bilateral risk control can be achieved by not compensating any losses and, in addition, charging each party a fine equal to the loss suffered by the other party. In this way, each party internalizes the full accident loss. This paper investigates the properties of this “double liability†rule under risk neutrality and risk aversion of the parties. Finally the use of this rule in the context of multiple-party accidents is discussed. The Geneva Papers on Risk and Insurance Theory (1990) 15, 159–169. doi:10.1007/BF01489707

Suggested Citation

  • Jörg Finsinger & Mark V. Pauly, 1990. "The Double Liability Rule*," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 15(2), pages 159-169, September.
    • Handle: RePEc:pal:genrir:v:15:y:1990:i:2:p:159-169
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    Cited by:

    1. Kirstein, Roland, 2004. "Anti-Teilen in Teams," CSLE Discussion Paper Series 2004-04, Saarland University, CSLE - Center for the Study of Law and Economics.
    2. Laszlo Goerke, 2002. "Accident Law: Efficiency May Require an Inefficient Standard," German Economic Review, Verein für Socialpolitik, vol. 3(1), pages 43-51, February.
    3. Ralf Ewert & Eberhard Feess & Martin Nell, 2000. "Auditor liability rules under imperfect information and costly litigation: the welfare-increasing effect of liability insurance," European Accounting Review, Taylor & Francis Journals, vol. 9(3), pages 371-385.

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