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Optimal Assignment of Liabilities

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  • González, Patrick

Abstract

I characterize a generalization of the negligence rule to assign compensating damages in an accident involving multiple tortfeasors. These tortfeasors have the opportunity to undertake spending in prevention and the rule is designed to provide them with the best incentives to do so. I study the case where liability is constraint in the sense that the optimal amount of effort (not constrained by liability) cannot be implemented. The optimal multi-player rule is to apply the negligence rule to the most liable player (the "deep-pocket" or the "victim", defined as the player who is the most responsive to monetary incentives under the strict liability rule) and the strict liability rule to everybody else.

Suggested Citation

  • González, Patrick, 2003. "Optimal Assignment of Liabilities," Cahiers de recherche 0305, GREEN.
  • Handle: RePEc:lvl:lagrcr:0305
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    File URL: http://www.green.ecn.ulaval.ca/CahiersGREEN2003/03-05.pdf
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    References listed on IDEAS

    as
    1. Grady, Mark F, 1990. "Multiple Tortfeasors and the Economy of Prevention," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 653-678, June.
    2. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9483, National Bureau of Economic Research, Inc.
    3. Ulrich Hege & Eberhard Feess, 2002. "original papers : Safety regulation and monitor liability," Review of Economic Design, Springer;Society for Economic Design, vol. 7(2), pages 173-185.
    4. Bergstrom, Ted C. & Blume, Larry & Varian, Hal, 1992. "Uniqueness of Nash equilibrium in private provision of public goods : An improved proof," Journal of Public Economics, Elsevier, vol. 49(3), pages 391-392, December.
    5. Eberhard Feess & Ulrich Hege, 1998. "Efficient Liability Rules for Multi-Party Accidents With Moral Hazard," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(2), pages 422-450, June.
    6. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211.
    7. Ulrich Hege & Eberhard Feess, 2002. "Safety regulation and monitor liability," Post-Print hal-00459892, HAL.
    8. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    9. Kornhauser, Lewis A & Revesz, Richard L, 1990. "Apportioning Damages among Potentially Insolvent Actors," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 617-651, June.
    10. Winand Emons & Joel Sobel, 1991. "On the Effectiveness of Liability Rules when Agents are not Identical," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 375-390.
    11. Kornhauser, Lewis A & Revesz, Richard L, 1994. "Multidefendant Settlements under Joint and Several Liability: The Problem of Insolvency," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 517-542, January.
    12. Kornhauser, Lewis A. & Revesz, Richard L., 1989. "Apportioning Damages Among Potentially Insolvent Actors," Working Papers 89-22, C.V. Starr Center for Applied Economics, New York University.
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    More about this item

    Keywords

    Negligence rule; limited liability; multiple tortfeasors;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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