Insolvency and Biased Standards--The Case for Proportional Liability
We analyze liability rules in a setting where injurers are potentially insolvent and where negligence standards may deviate from the socially optimal level. We show that proportional liability, which sets the measure of damages equal to the harm multiplied by the probability that it was caused by an injurer's negligence, is preferable to other existing negligence-based rules. Moreover, proportional liability outperforms strict liability if the standard of due care is not set too low. Our analysis also suggests that courts should rely on statistical evidence and bar individualized causal claims that link the harm suffered by a plaintiff to the actions of the defendant. Finally, we provide a result which might be useful to regulators when calculating minimum capital requirements or minimum mandatory insurance for different industries.
|Date of creation:||Dec 2009|
|Date of revision:|
|Contact details of provider:|| Postal: PO Box 8268, New Haven CT 06520-8268|
Phone: (203) 432-3576
Fax: (203) 432-5779
Web page: http://www.econ.yale.edu/ddp/
More information through EDIRC
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.:
- Camerer, Colin & Loewenstein, George & Weber, Martin, 1989. "The Curse of Knowledge in Economic Settings: An Experimental Analysis," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1232-54, October.
- Landes, William M, 1990. "Insolvency and Joint Torts: A Comment," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 679-89, June.
- Juan JosÃ© Ganuza & Fernando GÃ³mez, 2008. "Realistic Standards: Optimal Negligence with Limited Liability," The Journal of Legal Studies, University of Chicago Press, vol. 37(2), pages 577-594, 06.
- Robert D. Cooter, 1991. "Economic Theories of Legal Liability," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 11-30, Summer.
- Kornhauser, Lewis A & Revesz, Richard L, 1990. "Apportioning Damages among Potentially Insolvent Actors," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 617-51, June.
- Tabbach Avraham D., 2008. "Causation and Incentives to Choose Levels of Care and Activity Under the Negligence Rule," Review of Law & Economics, De Gruyter, vol. 4(1), pages 133-152, May.
- Schweizer, Urs, 2009. "Legal damages for losses of chances," International Review of Law and Economics, Elsevier, vol. 29(2), pages 153-160, June.
- Shmuel Leshem & Geoffrey P. Miller, 2009. "All-or-Nothing versus Proportionate Damages," The Journal of Legal Studies, University of Chicago Press, vol. 38(2), pages 345-382, 06.
- Kahan, Marcel, 1989. "Causation and Incentives to Take Care under the Negligence Rule," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 427-47, June.
- Steven Shavell, 1983.
"Uncertainty Over Causation and the Determination of Civil Liability,"
NBER Working Papers
1219, National Bureau of Economic Research, Inc.
- Shavell, Steven, 1985. "Uncertainty over Causation and the Determination of Civil Liability," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 587-609, October.
- Craswell, Richard & Calfee, John E, 1986. "Deterrence and Uncertain Legal Standards," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 279-303, Fall.
- Kaplow, Louis, 1994. "The Value of Accuracy in Adjudication: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 307-401, January.
When requesting a correction, please mention this item's handle: RePEc:ecl:yaleco:75r. 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: ()
If references are entirely missing, you can add them using this form.