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Variable Probabilities of Suit and Liability Rules

Author

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  • Sébastien ROUILLON (GREThA)

Abstract

This note provides an additional argument in favour of the use of a negligence rule in tort law. When the probability of suit varies among injurers and is not observable by the judge, the judge will fail to implement the socially optimal level of care using a strict liability rule (for this implies to set damages equal to harm multiplied by the inverse of the probability of suit). However, he can still implement it using a negligence rule, subject to the condition that he chooses the negligence standard properly (for if damages are set large enough, potential injurers will comply with the standard, regardless their probability of suit).

Suggested Citation

  • Sébastien ROUILLON (GREThA), 2008. "Variable Probabilities of Suit and Liability Rules," Cahiers du GREThA 2008-15, Groupe de Recherche en Economie Théorique et Appliquée.
  • Handle: RePEc:grt:wpegrt:2008-15
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    File URL: http://cahiersdugretha.u-bordeaux4.fr/2008/2008-15.pdf
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    References listed on IDEAS

    as
    1. Schmitz, Patrick W., 2000. "On the joint use of liability and safety regulation," International Review of Law and Economics, Elsevier, vol. 20(3), pages 371-382, September.
    2. Kaplow, Louis & Shavell, Steven, 2002. "Economic analysis of law," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 25, pages 1661-1784 Elsevier.
    3. Bebchuk, Lucian Arye & Kaplow, Louis, 1993. "Optimal sanctions and differences in individuals' likelihood of avoiding detection," International Review of Law and Economics, Elsevier, vol. 13(2), pages 217-224, June.
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    Cited by:

    1. Rouillon, Sebastien, 2008. "Safety regulation vs. liability with heterogeneous probabilities of suit," International Review of Law and Economics, Elsevier, vol. 28(2), pages 133-139, June.

    More about this item

    Keywords

    Liability; asymmetric information;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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