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Judgement Proofness under Four Different Precaution Technologies

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  • Guiseppe Dari Mattiaci
  • G.G.A. de Geest

Abstract

This study shows that the effects of judgment proofness on precaution depend on whether the injurer can reduce the probability of the accident, the magnitude of the harm, or both. Different legal solutions to the problem are examined: punitive damages, average compensation, undercompensation, accurate compensation and negligence. We find that when the injurer can only reduce the probability of the accident, negligence with average compensation is the best solution, but negligence with perfectly compensatory damages is the desirable solution if the injurer can only or also affect the magnitude of the harm.

Suggested Citation

  • Guiseppe Dari Mattiaci & G.G.A. de Geest, 2003. "Judgement Proofness under Four Different Precaution Technologies," Working Papers 03-16, Utrecht School of Economics.
  • Handle: RePEc:use:tkiwps:0316
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    References listed on IDEAS

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    1. Dari-Mattiacci, Giuseppe & De Geest, Gerrit, 2006. "When will judgment proof injurers take too much precaution?," International Review of Law and Economics, Elsevier, vol. 26(3), pages 336-354, September.
    2. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
    3. Hugh Gravelle & Nuno Garoupa, 2002. "Optimal Deterrence with Legal Defense Expenditure," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 366-379, July.
    4. Lewis, Tracy R. & Sappington, David E. M., 1999. "Using decoupling and deep pockets to mitigate judgment-proof problems1," International Review of Law and Economics, Elsevier, vol. 19(2), pages 275-293, June.
    5. Spier, Kathryn E, 1994. "Settlement Bargaining and the Design of Damage Awards," Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(1), pages 84-95, April.
    6. Boyd, James & Ingberman, Daniel E., 1999. "Do punitive damages promote deterrence?1," International Review of Law and Economics, Elsevier, vol. 19(1), pages 47-68, March.
    7. Kornhauser, Lewis A & Revesz, Richard L, 1990. "Apportioning Damages among Potentially Insolvent Actors," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 617-651, June.
    8. Kaplow, Louis, 1994. "The Value of Accuracy in Adjudication: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 307-401, January.
    9. Kaplow, Louis & Shavell, Steven, 1996. "Accuracy in the Assessment of Damages," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 191-210, April.
    10. Boyd, James & Ingberman, Daniel E, 1994. "Noncompensatory Damages and Potential Insolvency," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 895-910, June.
    11. 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.
    12. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
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    Citations

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    Cited by:

    1. Dari-Mattiacci, Giuseppe & De Geest, Gerrit, 2006. "When will judgment proof injurers take too much precaution?," International Review of Law and Economics, Elsevier, vol. 26(3), pages 336-354, September.
    2. Nussim, Jacob & Tabbach, Avraham D., 2009. "A revised model of unilateral accidents," International Review of Law and Economics, Elsevier, vol. 29(2), pages 169-177, June.
    3. Dari-Mattiacci, Giuseppe & Langlais, Eric, 2012. "Social Wealth and Optimal Care," International Review of Law and Economics, Elsevier, vol. 32(2), pages 271-284.
    4. Boyer, Marcel & Porrini, Donatella, 2011. "The impact of court errors on liability sharing and safety regulation for environmental/industrial accidents," International Review of Law and Economics, Elsevier, vol. 31(1), pages 21-29, March.
    5. Baumann, Florian & Friehe, Tim, 2009. "On the superiority of damage averaging in the case of strict liability," International Review of Law and Economics, Elsevier, vol. 29(2), pages 138-142, June.
    6. Gérard Mondello & Evens Salies, 2016. "Tort Law under Oligopolistic Competition," GREDEG Working Papers 2016-29, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    7. Tim Friehe, 2008. "On judgment proofness in the case of bilateral harm," European Journal of Law and Economics, Springer, vol. 26(2), pages 175-185, October.
    8. Julien Jacob & Sandrine Spaeter, 2016. "Large-Scale Risks and Technological Change: What About Limited Liability?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(1), pages 125-142, February.
    9. Gomez, Fernando & Penalva, Jose, 2015. "Tort reform and the theory of coordinating tort and insurance," International Review of Law and Economics, Elsevier, vol. 43(C), pages 83-97.
    10. Luppi, Barbara & Parisi, Francesco & Rajagopalan, Shruti, 2012. "The rise and fall of the polluter-pays principle in developing countries," International Review of Law and Economics, Elsevier, vol. 32(1), pages 135-144.
    11. Grajzl, Peter & Baniak, Andrzej, 2009. "Industry self-regulation, subversion of public institutions, and social control of torts," International Review of Law and Economics, Elsevier, vol. 29(4), pages 360-374, December.
    12. Francisco Ramos Romeu, 2010. "An economic theory of the regulation of preliminary measures," European Journal of Law and Economics, Springer, vol. 30(3), pages 267-300, December.
    13. Julien Jacob, 2011. "Innovation and diffusion in risky industries under liability law: the case of “double-impact” innovations," Working Papers of BETA 2011-24, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    14. Nicolas Lampach & Kene Boun My & Sandrine Spaeter, 2016. "Risk, Ambiguity and Efficient Liability Rules: An experiment," Working Papers of BETA 2016-30, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    15. Nicolas Lampach & Sandrine Spaeter, 2016. "The Efficiency of (strict) Liability Rules revised in Risk and Ambiguity," Working Papers of BETA 2016-29, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    16. Guiseppe Dari Mattiaci & F. Parisi, 2003. "The Economics of Tort Law: A Précis," Working Papers 03-13, Utrecht School of Economics.
    17. Bidénam Kambia-Chopin, 2010. "Environmental risks, the judgment-proof problem and financial responsibility," European Journal of Law and Economics, Springer, vol. 30(2), pages 77-87, October.
    18. Serge Garcia & Julien Jacob & Eve-Angéline Lambert, 2017. "Comparison of liability sharing rules for environmental damage: An experiment with different levels of solvency," Working Papers of BETA 2017-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    19. Mattiacci, Giuseppe Dari & Parisi, Francesco, 2003. "The cost of delegated control: vicarious liability, secondary liability and mandatory insurance," International Review of Law and Economics, Elsevier, vol. 23(4), pages 453-475, December.
    20. G.G.A. de Geest & G. Dari Mattiacci, 2005. "Soft Regulators, though judges," Working Papers 05-06, Utrecht School of Economics.
    21. Arbel, Yonathan A., 2016. "Shielding of assets and lending contracts," International Review of Law and Economics, Elsevier, vol. 48(C), pages 26-35.
    22. Giuseppe Dari-Mattiacci & Barbara M. Mangan, 2008. "Disappearing Defendants versus Judgment-Proof Injurers," Economica, London School of Economics and Political Science, vol. 75(300), pages 749-765, November.
    23. Tim Friehe, 2007. "A note on judgment proofness and risk aversion," European Journal of Law and Economics, Springer, vol. 24(2), pages 109-118, October.
    24. van 't Veld, Klaas & Hutchinson, Emma, 2009. "Excessive spending by firms to avoid accidents: Is it a concern in practice?," International Review of Law and Economics, Elsevier, vol. 29(4), pages 324-335, December.

    More about this item

    Keywords

    insolvency; judgment proof; liability; bankruptcy;

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law

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