IDEAS home Printed from https://ideas.repec.org/p/bep/yaloln/yale_lepp-1026.html
   My bibliography  Save this paper

Optimal Delegation and Decoupling in the Design of Liability Rules

Author

Listed:
  • Ian Ayres

    (Yale Law School)

  • Paul Goldbart

    (University of Illinois at Urbana-Champaign, Department of Physics)

Abstract

The central allocative decision confronting a judge in a nuisance dispute should not concern the identity of the initial entitlement recipient but rather the identity of the more efficient chooserthe litigant who can more efficiently allocate the entitlement. We show that liability rules can produce four basic allocations which differ centrally in the ways in which courts delegate to litigants the authority to ultimately allocate the entitlement. Two classes concern "single chooser" rules that vest (in the absence of an agreement to the contrary) the allocative decision solely in one of the litigants. The other two classes concern a new type of rule, "dual chooser" rules, that allow either party to veto the transfer of an entitlement. Dualchooser rules are more than a theoretical curiosity both because they exist in our current law and because at times they produce systematically greater allocative efficiency than either type of single-chooser rule. Two heads are sometimes better than one.A central result of the paper is that in choosing among different liability rules allocative concerns can be decoupled from distributive concerns. There exist an infinite number of liability rules which produce each of the four basic allocations, but every rule within a particular class divides differently between the litigants the expected value of the allocation. To successfully decouple, courts should at times impose "call option," "put option," "Pay or be Paid," and "Pay or Pay" rules.

Suggested Citation

  • Ian Ayres & Paul Goldbart, "undated". "Optimal Delegation and Decoupling in the Design of Liability Rules," Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series yale_lepp-1026, Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy.
  • Handle: RePEc:bep:yaloln:yale_lepp-1026
    as

    Download full text from publisher

    File URL: http://lsr.nellco.org/cgi/viewcontent.cgi?article=1026&context=yale/lepp
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ronen Avraham & Zhiyong Liu, 2006. "Incomplete Contracts with Asymmetric Information: Exclusive Versus Optional Remedies," American Law and Economics Review, Oxford University Press, vol. 8(3), pages 523-561.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bep:yaloln:yale_lepp-1026. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum). General contact details of provider: http://www.law.yale.edu/outside/html/home/index.htm .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.