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Contractor selection problem under extended liability

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  • Ichinose, Daisuke

Abstract

This paper solves the problem of a principal firm's choice of contracting agents under extended liability, where agents have the possibility of causing an accident and also are at risk of becoming insolvent. The analysis shows that the negligence rule for contracting agents enhances the price competitiveness of the agent who takes proper precautions and thus that the liability rule consisting of the negligence rule on contracting agents that extends liability to the principal firm is superior to other types of liability rules.

Suggested Citation

  • Ichinose, Daisuke, 2011. "Contractor selection problem under extended liability," International Review of Law and Economics, Elsevier, vol. 31(1), pages 48-57, March.
    • Handle: RePEc:eee:irlaec:v:31:y:2011:i:1:p:48-57
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    References listed on IDEAS

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    Cited by:

    1. Seshimo, Hiroyuki, 2022. "Optimal extended liability rule in a competitive financial market with heterogeneous borrower firms," Journal of Mathematical Economics, Elsevier, vol. 98(C).

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