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Tort Law under Oligopolistic Competition

Author

Listed:
  • Gérard Mondello

    (Université Côte d'Azur, France
    GREDEG CNRS)

  • Evens Salies

    (OFCE)

Abstract

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.

Suggested Citation

  • Gérard Mondello & Evens Salies, 2016. "Tort Law under Oligopolistic Competition," GREDEG Working Papers 2016-29, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  • Handle: RePEc:gre:wpaper:2016-29
    as

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    File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2016-29.pdf
    File Function: First version, 2016
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    References listed on IDEAS

    as
    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. Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756, January.
    4. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
    5. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
    6. 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.
    7. James Boyd, 1994. "Risk, Liability, and Monopoly," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(3), pages 387-403.
    8. 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.
    9. Yolande Hiriart & David Martimort, 2006. "The benefits of extended liability," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 562-582, September.
    10. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Tort Law; Strict Liability; Negligence rule; Imperfect Competition; Oligopoly; Cournot Competition;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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