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Allocation of Liability: On the Efficiency of Composite Sharing Rules

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  • Shmuel Leshem

Abstract

Distributing liability according to injurers' relative fault produces incentives for rent-seeking (excessive care) or free-riding (insufficient care) if precautions are complements or substitutes. We show that composite sharing rules consisting of different weights of proportional and equal allocations calibrate injurers' incentives. The optimal weight of the proportional relative to the equal allocation increases with the degree of substitutability between injurers' precautions. As the number of injurers increases, the optimal composite rule tends to an equal allocation if precautions are pure complements or one where the most careless injurer is liable for the entire harm if precautions are pure substitutes.

Suggested Citation

  • Shmuel Leshem, 2017. "Allocation of Liability: On the Efficiency of Composite Sharing Rules," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 173(1), pages 25-43, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201703)173:1_25:aolote_2.0.tx_2-h
    DOI: 10.1628/093245616X14743741664719
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    Citations

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    Cited by:

    1. Baumann, Florian & Charreire, Maxime & Cosnita-Langlais, Andreea, 2020. "Market collusion with joint harm and liability sharing," International Review of Law and Economics, Elsevier, vol. 62(C).
    2. Dylan Martin-Lapoirie, 2022. "Teamwork in health care and medical malpractice liability: an experimental investigation," European Journal of Law and Economics, Springer, vol. 54(2), pages 251-282, October.
    3. Yi Li, 2019. "Apportioning indivisible damage and strategic diffusion of pollution abatement technology," Journal of Economics, Springer, vol. 126(1), pages 19-42, January.

    More about this item

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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