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Optimal Assignment of Liabilities

  • Gonz�lez, Patrick
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    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.

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    Paper provided by GREEN in its series Cahiers de recherche with number 0305.

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    Date of creation: 2003
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    Handle: RePEc:lvl:lagrcr:0305
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    1. 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.
    2. 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.
    3. Emons,Winand & Sobel,Joel, 1988. "On the effectiveness of liability rules when agents are not identical," Discussion Paper Serie A 212, University of Bonn, Germany.
    4. 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 517-42, January.
    5. 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 617-51, 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. 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.
    8. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
    9. Grady, Mark F, 1990. "Multiple Tortfeasors and the Economy of Prevention," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 653-78, June.
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