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Decomposition of accident loss and decoupled liability assignment: A class of negligencerules

Author

Listed:
  • Papiya Ghosh

    (Indian Institute of Foreign Trade,New Delhi,India)

  • Rajendra P. Kunda

    (Jawaharlal Nehru University, New Delhi, India)

Abstract

This paper is a contribution to the literature on efficient assignment of liabilities for accidental losses arising out of two party interactions involving negative externalities.The objective is to examine the requirements that eciency imposes on rules for the assignment of liabilities for such losses. We study efficiency proper ties of a very general class o frules which (i) decompose the loss into two components (speciied loss and excess loss); (ii)assigns the entire excess loss to the injurer if she is negligent and to the victim otherwise; and assign fixed proportions (not necessarily adding upto 1) of the specified loss to the two parties with the possibility of eventually resulting in an assignment of liabilities which can in principle be decoupled. In contrast to existing results we demonstrate that assignment of the specified loss is also important efficiency and complete decoupling is not inconsistent with efficiency.

Suggested Citation

  • Papiya Ghosh & Rajendra P. Kunda, 2021. "Decomposition of accident loss and decoupled liability assignment: A class of negligencerules," Working Papers 2157, Indian Institute of Foreign Trade.
    • Handle: RePEc:ift:wpaper:2157
    as

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    References listed on IDEAS

    as
    1. Satish Kumar Jain, 2015. "Economic Analysis of Liability Rules," Springer Books, Springer, edition 127, number 978-81-322-2029-9, September.
    2. Satish Jain, 2006. "Efficiency of liability rules: A reconsideration," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(3), pages 359-373.
    3. Jain Satish K., 2012. "Decoupled Liability and Efficiency: An Impossibility Theorem," Review of Law & Economics, De Gruyter, vol. 8(3), pages 697-718, December.
    4. Jain Satish K. & Kundu Rajendra P., 2015. "Decomposition of Accident Loss and Efficiency of Liability Rules," Review of Law & Economics, De Gruyter, vol. 11(3), pages 453-480, November.
    5. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    6. A. Mitchell Polinsky & Yeon-Koo Che, 1991. "Decoupling Liability: Optimal Incentives for Care and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 562-570, Winter.
    7. Harshil Kaur & Rajendra P. Kundu, 2020. "Efficient Liability Assignment: Is Coupling a Necessity?," Economics Bulletin, AccessEcon, vol. 40(3), pages 2388-2394.
    8. Peter A. Diamond, 1974. "Accident Law and Resource Allocation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 366-405, Autumn.
    9. Satish K. Jain & Ram Singh, 2002. "Efficient Liability Rules: Complete Characterization," Journal of Economics, Springer, vol. 75(2), pages 105-124, March.
    10. Kundu, Rajendra P. & Kaur, Harshil, 2022. "Efficient simple liability assignment rules: A complete characterization," Mathematical Social Sciences, Elsevier, vol. 116(C), pages 22-31.
    11. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
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    More about this item

    Keywords

    LiabilityRule; negligence; decompositionofloss; decoupledliability; eciency.;
    All these keywords.

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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    This paper has been announced in the following NEP Reports:

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