Law and Economics of Obligations
While various liability rules of tort law provide efficient incentives to invest, breach remedies of contract law are claimed to be distortive. Since, at least in Germany, obligations law provides general rules for both contractual and tort relationships such discrepancy seems puzzling. The paper identifies a saddle point property as the driving force behind most efficiency results and it establishes that fault rules of a general type generate this property. The model is then confronted with important legal rules of the German law of obligations. The alleged inefficiency of expectation damages turns out to rest, not on a failure of breach remedies, but on the binary nature of delivery choice as imposed by the traditional analysis of contract law.
|Date of creation:||Feb 2004|
|Date of revision:|
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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NBER Working Papers
9694, National Bureau of Economic Research, Inc.
- Edlin, Aaron S & Reichelstein, Stefan, 1996.
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- Aaron S. Edlin & Stefan Reichelstein, 1995. "Holdups, Standard Breach Remedies, and Optimal Investment," NBER Working Papers 5007, National Bureau of Economic Research, Inc.
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