Strict Liability, Capped Strict Liability, and Care Effort under Asymmetric Information
This paper compares the effectiveness of strict liability and capped strict liability regimes in an agency relationship among a regulatory agency and operators of risky activities. Under a double asymmetric information assumption (wealth and efficiency in care effort), it shows that capping liability is more efficient than keeping with strict liability, this at the price of an informational rent. Efficiency means that the efficient agent supplies the level of safety effort equivalent to the first best solution one. At the optimum, this rent is minimized by the efficient contract supplied by the principal.
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| Length: | |
| Date of creation: | 2012 |
| Publication status: | Published in Journal of Institutional and Theoretical Economics, Mohr Siebeck, 2012, 168 (2), pp.232-251 |
| Handle: | RePEc:hal:journl:hal-00727213 |
| Note: | View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00727213 |
| Contact details of provider: | Web page: https://hal.archives-ouvertes.fr/
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References listed on IDEAS
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