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|
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- 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.
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NBER Working Papers
9483, National Bureau of Economic Research, Inc.
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- Schweizer, Urs, 2005. "Law and Economics of Obligations," International Review of Law and Economics, Elsevier, vol. 25(2), pages 209-228, June.
- Giuseppe Dari Mattiacci, . "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.
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