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Legal Damages at Uncertain Causation

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  • Schweizer, Urs

Abstract

The legal notion of damages requires to compare the actual value of the creditor’s assets with the hypothetical value that would have prevailed if the debtor had met his obligation. Moreover, values and causation may be uncertain. If nature’s contribution is modelled as a random move then the interaction between debtor and nature can be described in normal form which, in turn, allows to capture causality and legal damages in a consistent way. In practice, such random moves of nature are rarely observable. Yet, statistical inference may reveal sufficient information to test for causation and to estimate legal damages on average over observable events as the present paper will establish.

Suggested Citation

  • Schweizer, Urs, 2006. "Legal Damages at Uncertain Causation," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 160, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:160
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    File URL: https://epub.ub.uni-muenchen.de/13391/1/160.pdf
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    References listed on IDEAS

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    1. Schweizer, Urs, 2005. "Law and Economics of Obligations," International Review of Law and Economics, Elsevier, vol. 25(2), pages 209-228, June.
    2. Roger B. Myerson, 1999. "Nash Equilibrium and the History of Economic Theory," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1067-1082, September.
    3. Urs Schweizer, 2005. "The Pure Theory of Multilateral Obligations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(2), pages 239-254, June.
    4. 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.
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    Cited by:

    1. Hylton, Keith N. & Lin, Haizhen, 2013. "Negligence, causation, and incentives for care," International Review of Law and Economics, Elsevier, vol. 35(C), pages 80-89.
    2. Eberhard Feess & Gerd Muehlheusser & Ansgar Wohlschlegel, 2009. "Environmental liability under uncertain causation," European Journal of Law and Economics, Springer, vol. 28(2), pages 133-148, October.

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    More about this item

    Keywords

    estimating legal damages; liability for torts; liability for breach of contracts;
    All these keywords.

    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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