The inefficiency of decoupling
The scope of this paper is to demonstrate that only in case of unilateral accident a party will take efficient level of activity. In all cases of bilateral accidents there will be aòwaus a party that will take a too high level of activity. But the reason that I try to demonstrate in this work is not that one party does not consider the expected damage, but instead the also the party that has an interest to consider the expected damage will take a too high level of activity (i.e. even if the expected damage is part of her private costs). The reason why that happens is that, in case of strict liability for the injurer with a defence he will not take account of the precaution costs of the victim, and in any case of a regime of negligence the victim will not consider in her cost-benefit analysis the precaution costs of the injurer. The consequence of that is a level of activity which is inefficient for a different reason with respect to that well known: that is the fact that a party does not bear the expected damage. I accept this known solution but I underpin another problem. The conclusion is that also decoupling does not produce an efficient consequence and that the search of tort efficient rules is still more difficult.
|Date of creation:||Apr 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:38884. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.