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“... or should have known ...”: On Foreseeability and Paradox in Law and Economics


  • Steven Sullivan

    (New York University)


The economic analysis of law, as a subdiscipline of economics, has traditionally been about analyzing the efficiency properties of different rules for assigning known quanta of damages. This work (from the author's NYU doctoral dissertation) focuses on the processes by which agents in legal institutions come to know what they have been assumed to know when the economist models their behavior. This essay suggests that mainstream Law and Economics’ approach to conceptualizing unforeseeable events either contradicts some of its specific conclusions about liability rules or renders it incapable of applying its traditional efficiency criteria to the study of comparative legal systems. An alternative to the efficiency criterion is discussed.

Suggested Citation

  • Steven Sullivan, 2000. "“... or should have known ...”: On Foreseeability and Paradox in Law and Economics," Law and Economics 0004003, EconWPA.
  • Handle: RePEc:wpa:wuwple:0004003
    Note: Type of Document - WordPerfect; prepared on PC-Compatible; to print on Any PC-Compatible (Canon Bubble); pages: 33; figures: None. I invite your comments and suggestions; this paper was the third chapter of my 1998 NYU doctoral dissertation.

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    References listed on IDEAS

    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
    2. Huang, Roger D. & Stoll, Hans R., 1996. "Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE," Journal of Financial Economics, Elsevier, vol. 41(3), pages 313-357, July.
    3. Doyle, Christopher, 1988. "Different selling strategies in Bertrand oligopoly," Economics Letters, Elsevier, vol. 28(4), pages 387-390.
    4. Kandel, Eugene & Marx, Leslie M., 1997. "Nasdaq market structure and spread patterns," Journal of Financial Economics, Elsevier, vol. 45(1), pages 61-89, July.
    5. Crocker, Keith J & Lyon, Thomas P, 1994. "What do Facilitating Practices Facilitate? An Empirical Investigation of Most-Favored-Nation Clauses in Natural Gas Contracts," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 297-322, October.
    6. Severin Borenstein, 1991. "Selling Costs and Switching Costs: Explaining Retail Gasoline Margins," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 354-369, Autumn.
    7. Christie, William G & Harris, Jeffrey H & Schultz, Paul H, 1994. " Why Did NASDAQ Market Makers Stop Avoiding Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1841-1860, December.
    8. Christie William G. & Huang Roger D., 1994. "Market Structures and Liquidity: A Transactions Data Study of Exchange Listings," Journal of Financial Intermediation, Elsevier, vol. 3(3), pages 300-326, June.
    9. Corts, Kenneth S., 1995. "On the robustness of the argument that price-matching is anti-competitive," Economics Letters, Elsevier, vol. 47(3-4), pages 417-421, March.
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    Posner foreseeability equilibrium strict liability Austrian;

    JEL classification:

    • K - Law and Economics

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