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Efficiency Of Equilibria Under Comparative Causation

  • FRANCESCO PARISI

    (Department of Economics, Brown University Providence, RI 02906 USA)

  • Ram Singh

    (Department of Economics, Delhi School of Economics, Delhi, India)

For past three decades or so, the negligence liability has been a major preoccupation of the economic analysis of liability rules. However, recently it has invited severe criticisms on several counts. Several leading legal scholars have championed a comparative causation based allocation of liability. According to these scholars, comparative causation based liability is more equitable than negligence liability. Moreover, some studies show that courts and juries are inclined toward comparative apportioning of liability. Nonetheless, implications of comparative causation based liability especially its eciency properties have remained under-explored. In this paper, we have studied the implications of comparative causation. We have shown that a mix of negligence and comparative causation liabilities can induce vigilant and equitable equitable equilibria, in which parties choose to be vigilant and accident loss is shared between them. However, comparative causation achieves equity at the cost of economic effciency.

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 179.

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Length: 18 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:cde:cdewps:179
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  2. A. Mitchell Polinsky & Yeon-Koo Che, 1991. "Decoupling Liability: Optimal Incentives for Care and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 562-570, Winter.
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