A Tort for Risk and Endogenous Bankruptcy

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A Tort for Risk and Endogenous Bankruptcy

Author Info

Thomas J. Miceli (University of Connecticut)
Kathleen Segerson (University of Connecticut)

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Abstract

Conventional tort law bars victims of exposure to a toxic substance from filing suit until they actually develop symptoms of illness. Practically speaking, this rule often bars recovery due to bankruptcy and causal uncertainty. One solution is to allow victims to file at exposure for expected damages (a tort for risk). The trade-off is that such a rule may trigger a race to file among exposure victims, thereby itself inducing bankruptcy. This paper characterizes the conditions under which such a race will occur in equilibrium and examines the implications for social welfare.

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Publisher Info
Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2004-24.

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Length: 25 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:uct:uconnp:2004-24

Note: We acknowledge the very useful comments of David Martimort and an anonymous referee.
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Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
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Web page: http://www.econ.uconn.edu/
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Find related papers by JEL classification:
K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability
K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Renewable Resources and Conservation: Issues in International Trade

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-10-18 (All new papers)
NEP-LAW-2004-10-18 (Law & Economics)
NEP-REG-2004-10-18 (Regulation)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June. [Downloadable!] (restricted)
Rose-Ackerman, Susan, 1989. "Dikes, Dams, and Vicious Hogs: Entitlement and Efficiency in Tort Law," Journal of Legal Studies, University of Chicago Press, vol. 18(1), pages 25-50, January.
Fischer, Michael J, 1996. "Union Carbide's Bhopal Incident: A Retrospective," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 257-69, May.
Miceli, Thomas J. & Segerson, Kathleen, 2003. "A note on optimal care by wealth-constrained injurers," International Review of Law and Economics, Elsevier, vol. 23(3), pages 273-284, September. [Downloadable!] (restricted)
Other versions:
- Thomas J. Miceli & Kathleen Segerson, 2001. "A Note on Optimal Care by Wealth-Constrained Injurers," Working papers 2002-44, University of Connecticut, Department of Economics, revised May 2002. [Downloadable!]
Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June. [Downloadable!] (restricted)
Other versions:
- Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23. [Downloadable!]

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Thomas J. Miceli & Kathleen Segerson, 2004. "Do Exposure Suits Produce a "Race to File"? An Economic Analysis of a Tort for Risk," Working papers 2004-25, University of Connecticut, Department of Economics. [Downloadable!]
Other versions:
- Thomas J. Miceli & Kathleen Segerson, 2001. "Do Exposure Suits Produce a 'Race to File'? An Economic Analysis of a Tort for Risk," Working papers 2002-42, University of Connecticut, Department of Economics, revised Jun 2004. [Downloadable!]
- Thomas J. Miceli & Kathleen Segerson, 2005. "Do Exposure Suits Produce a "Race to File"? An Economic Analysis of a Tort for Risk," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 613-627, Autumn.

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