Loss-sharing between Nonnegligent Parties
Shavell (1980) established that all existing tort regimes fail to incentivize optimal activity levels. The bearer of residual loss adopts a socially optimal activity level, however the non-bearer of residual loss will adopt an excessive level of activity. In this paper, we explore alternative liability rules, which distribute the cost of accidents between non-negligent parties, effectively rendering both parties (injurer and victim) partial residual bearers of loss. We introduce a bilateral accident model with care and activity levels, assuming risk neutrality. We determine conditions where loss-sharing for nonnegligent torts may be a desirable alternative for policymakers, and analyze the social cost of accidents under such shared-liability regimes. We also extend our analysis to account for role-uncertainty of the parties, as well as real-world implications for tort law.
|Date of creation:||2014|
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- Parisi Francesco & Singh Ram, 2010.
"The Efficiency of Comparative Causation,"
Review of Law & Economics,
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- Singh Ram, 2007. "Comparative Causation and Economic Efficiency: When Activity Levels are Constant," Review of Law & Economics, De Gruyter, vol. 3(2), pages 383-406, December.
- Oren Bar-Gill & Omri Ben-Shahar, 2003. "The Uneasy Case for Comparative Negligence," American Law and Economics Review, Oxford University Press, vol. 5(2), pages 433-469, August.
- Arlen, Jennifer H., 1990. "Re-examining liability rules when injurers as well as victims suffer losses," International Review of Law and Economics, Elsevier, vol. 10(3), pages 233-239, December. Full references (including those not matched with items on IDEAS)
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