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Decoupled Liability and Efficiency: An Impossibility Theorem

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  • Jain Satish K.

    (Jawaharlal Nehru University)

Abstract

A basic feature of tort law is that of coupled liability: the damages awarded to the victim equal the liability imposed on the injurer. This feature of tort law is incorporated in the very definition of a liability rule by postulating that the shares of loss borne by the two parties sum to one. In this paper the relationship between this feature of tort law and efficiency is investigated. It is shown that coupled liability is necessary for efficiency, i.e., if a rule is such that it invariably gives rise to efficient outcomes then it must be the case that under it the liability is coupled. In other words, no rule with decoupled liability can be such that it always yields efficient outcomes.

Suggested Citation

  • Jain Satish K., 2012. "Decoupled Liability and Efficiency: An Impossibility Theorem," Review of Law & Economics, De Gruyter, vol. 8(3), pages 697-718, December.
    • Handle: RePEc:bpj:rlecon:v:8:y:2012:i:3:p:697-718:n:4
    DOI: 10.1515/1555-5879.1555
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    References listed on IDEAS

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    1. A. Mitchell Polinsky & Yeon-Koo Che, 1991. "Decoupling Liability: Optimal Incentives for Care and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 562-570, Winter.
    2. Satish K. Jain & Ram Singh, 2002. "Efficient Liability Rules: Complete Characterization," Journal of Economics, Springer, vol. 75(2), pages 105-124, March.
    3. Miceli, Thomas J., 1997. "Economics of the Law: Torts, Contracts, Property, Litigation," OUP Catalogue, Oxford University Press, number 9780195103908.
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    Cited by:

    1. Harshil Kaur & Rajendra P. Kundu, 2020. "Efficient Liability Assignment: Is Coupling a Necessity?," Economics Bulletin, AccessEcon, vol. 40(3), pages 2388-2394.
    2. Papiya Ghosh & Rajendra P. Kunda, 2021. "Decomposition of accident loss and decoupled liability assignment: A class of negligencerules," Working Papers 2157, Indian Institute of Foreign Trade.
    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.
    4. Allan M Feldman & Ram Singh, 2021. "Equilibria under Liability Rules: How the standard claims fall apart," Working papers 315, Centre for Development Economics, Delhi School of Economics.
    5. Feldman Allan & Singh Ram, 2021. "Equilibria Under Negligence Liability: How the Standard Claims Fall Apart," Review of Law & Economics, De Gruyter, vol. 17(1), pages 1-33, March.
    6. Papiya Ghosh & Rajendra P. Kundu, 2023. "Decomposition of accident loss and decoupled liability assignment: A class of negligence rules," Indian Economic Review, Springer, vol. 58(1), pages 119-140, June.

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