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The inefficiency of decoupling

Author

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  • baffi, enrico

Abstract

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.

Suggested Citation

  • baffi, enrico, 2012. "The inefficiency of decoupling," MPRA Paper 38884, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38884
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    More about this item

    Keywords

    Inefficient Decoupling; excessive activity Level; Precuatoray Externalities: Pigouvian Tax;

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • K19 - Law and Economics - - Basic Areas of Law - - - Other
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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