Tortious Acts Affecting Markets
The present paper examines an injurer causing a temporary blackout to a firm as the primary victim but also affecting customers and competitors of the firm. Reflecting existing legal practice, the paper investigates efficiency properties of the negligence rule granting recovery of private losses but to the primary victim only. The regime is shown to provide efficient incentives for precaution provided that the primary loss exceeds the social loss from accidents. The main contribution of the paper consists of an explicit analysis of markets affected by a temporary blackout of one firm. The analysis reveals that the private loss exceeds the social loss indeed if the market is less than fully competitive. Moreover, the net social loss remains positive, no matter which market structure prevails.
|Date of creation:||Apr 2006|
|Contact details of provider:|| Postal: Geschwister-Scholl-Platz 1, D-80539 Munich, Germany|
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- Kahan, Marcel, 1989. "Causation and Incentives to Take Care under the Negligence Rule," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 427-447, June.
- Steven Shavell, 2003.
"Economic Analysis of Accident Law,"
NBER Working Papers
9483, National Bureau of Economic Research, Inc.
- Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
- Giuseppe Dari Mattiacci, "undated". "The Economics Of Pure Economic Loss And The Internalisation Of Multiple Externalities," German Working Papers in Law and Economics 2003-1-1053, Berkeley Electronic Press.
- N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
- Gilead, Israel, 1997. "Tort law and internalization: The gap between private loss and social cost," International Review of Law and Economics, Elsevier, vol. 17(4), pages 589-608, December.
- Schweizer, Urs, 2005. "Law and Economics of Obligations," International Review of Law and Economics, Elsevier, vol. 25(2), pages 209-228, June. Full references (including those not matched with items on IDEAS)
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