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On the incentive effects of damage averaging in tort law

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  • Tim Friehe

    (Eberhard Karls University, Tübingen)

Abstract

It has been generally accepted for unilateral-care models that care incentives are not affected by the use of either accurate damages or average damages if injurers lack knowledge of the precise damage level they might cause. This paper shows that in bilateral-care models with heterogeneous victims, consequences of averages as damage measure are critically dependent on the weighing of respective harm levels. Importantly, we establish that there is an average measure which allows the attainment of efficient care in the bilateral-care framework.

Suggested Citation

  • Tim Friehe, 2007. "On the incentive effects of damage averaging in tort law," Economics Bulletin, AccessEcon, vol. 11(2), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-07k10002
    as

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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume11/EB-07K10002A.pdf
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    References listed on IDEAS

    as
    1. Miceli Thomas J., 2006. "On Negligence Rules and Self-Selection," Review of Law & Economics, De Gruyter, vol. 2(3), pages 349-361, October.
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    3. 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.
    4. Ganuza Juan-Jose & Gomez Fernando, 2006. "Caution, Children Crossing: Heterogeneity of Victim's Cost of Care and the Negligence Rule," Review of Law & Economics, De Gruyter, vol. 1(3), pages 365-397, January.
    5. Ram Singh, 2003. "Efficiency of 'Simple' Liability Rules When Courts Make Erroneous Estimation of the Damage," European Journal of Law and Economics, Springer, vol. 16(1), pages 39-58, July.
    6. Che, Yeon-Koo, 1996. "Equilibrium formation of class action suits," Journal of Public Economics, Elsevier, vol. 62(3), pages 339-361, November.
    7. Miceli, Thomas J., 1997. "Economics of the Law: Torts, Contracts, Property, Litigation," OUP Catalogue, Oxford University Press, number 9780195103908, Decembrie.
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    More about this item

    JEL classification:

    • K1 - Law and Economics - - Basic Areas of Law
    • D6 - Microeconomics - - Welfare Economics

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