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Tortious Acts Affecting Markets

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  • Schweizer, Urs

Abstract

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.

Suggested Citation

  • Schweizer, Urs, 2006. "Tortious Acts Affecting Markets," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 106, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:106
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    References listed on IDEAS

    as
    1. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
    2. Schweizer, Urs, 2005. "Law and Economics of Obligations," International Review of Law and Economics, Elsevier, vol. 25(2), pages 209-228, June.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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