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The Structure of Incremental Liability Rules

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  • Jain Satish K.

    (Jawaharlal Nehru University)

Abstract

This paper investigates the structure of incremental liability rules. Necessary and sufficient conditions are derived for an incremental liability rule to be efficient. A liability rule, in the ordinary sense of the term, to be called a standard liability rule, is a rule which specifies the proportions in which the loss, in case of accident, is to be apportioned between the victim and the injurer as a function of their proportions of non-negligence. An incremental liability rule is a rule which specifies (i) which of the two parties, the victim or the injurer, is to be the non-residual liability holder; and (ii) the proportion of the incremental loss, which can be ascribed to the negligence of the non-residual party, to be borne by the non-residual liability holder. The necessary and sufficient conditions for an incremental liability rule to be efficient, derived in the paper, can be stated as follows: Let the party which is the residual liability holder when both parties are non-negligent be designated as r and the other party as nr. An incremental liability rule is efficient for every admissible application iff its structure is such that: (i) If party r is negligent and party nr is non-negligent, then party r must remain the residual liability holder. (ii) If party nr is negligent and party r is non-negligent, then party nr must either become the residual liability holder or liability of nr must be equal to the entire incremental loss which can be ascribed to the negligence of nr.

Suggested Citation

  • Jain Satish K., 2009. "The Structure of Incremental Liability Rules," Review of Law & Economics, De Gruyter, vol. 5(1), pages 373-398, June.
    • Handle: RePEc:bpj:rlecon:v:5:y:2009:i:1:n:16
    DOI: 10.2202/1555-5879.1209
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    References listed on IDEAS

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    1. Satish K. Jain & Ram Singh, 2002. "Efficient Liability Rules: Complete Characterization," Journal of Economics, Springer, vol. 75(2), pages 105-124, March.
    2. 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. Dari-Mattiacci Giuseppe & Hendriks Eva S., 2013. "Relative Fault and Efficient Negligence: Comparative Negligence Explained," Review of Law & Economics, De Gruyter, vol. 9(1), pages 1-40, June.
    2. Jain, Satish, 2010. "Market, Democracy, and Diversity of Individual Preferences," Working Papers 7, JICA Research Institute.
    3. Kundu, Rajendra P. & Kaur, Harshil, 2022. "Efficient simple liability assignment rules: A complete characterization," Mathematical Social Sciences, Elsevier, vol. 116(C), pages 22-31.

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