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Tort Law under Oligopolistic Competition

Listed author(s):
  • Gérard Mondello

    (Université Côte d'Azur, France
    GREDEG CNRS)

  • Evens Salies

    (OFCE)

This article extends the unilateral accident standard model to allow for Cournot competition. Assuming risk-neutrality for the regulator and injurers, it analyzes three liability regimes: strict liability, negligence rule, and strict liability with administrative authorization or permits systems. Under competition the equivalence between negligence rule and strict liability no longer holds, and negligence insures a better level of social care. However, enforcing both a permit system and strict liability restores equivalence between liability regimes. However, whatever the current regime, competition leads to lower the global safety level of industry. Indeed, the stronger firm may benefit from safety rents, which they may use to increase production rather that maintaining a high level of safety.

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File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2016-29.pdf
File Function: First version, 2016
Download Restriction: no

Paper provided by Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis in its series GREDEG Working Papers with number 2016-29.

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Length: 29 pages
Date of creation: Sep 2016
Handle: RePEc:gre:wpaper:2016-29
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Web page: http://www.gredeg.cnrs.fr

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  1. Mark A. Geistfeld, 2009. "Products Liability," Chapters,in: Tort Law and Economics, chapter 11 Edward Elgar Publishing.
  2. Giuseppe Dari-Mattiacci & Gerrit De Geest, 2005. "Judgment Proofness under Four Different Precaution Technologies," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(1), pages 1-38, March.
  3. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
  4. Florian Baumann & Klaus Heine, 2013. "Innovation, Tort Law, and Competition," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(4), pages 703-719, December.
  5. Yolande Hiriart & David Martimort, 2006. "The benefits of extended liability," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 562-582, September.
  6. Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
  7. Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756, January.
  8. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
  9. James Boyd, 1994. "Risk, Liability, and Monopoly," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(3), pages 387-403.
  10. Viscusi, W Kip & Moore, Michael J, 1993. "Product Liability, Research and Development, and Innovation," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 161-184, February.
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