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Efficient Compensation: Lessons from Civil Liability

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  • Urs Schweizer

Abstract

This paper deals with compensation requirements ensuring efficient incentives in a setting with two active parties whose decisions affect a third party through an external effect. To achieve efficient incentives under civil liability, expectation damages should be based on a reasonable-person standard, and enrichments due to deviations from obligations may have to be returned. Adapting these lessons to the takings interpretation of the model would require unusual steps, unheard of in actual compensation practice. Yet, if taking decisions are reached in line with theories of public choice, an externality is implicitly present that, if neglected, tends to distort incentives.

Suggested Citation

  • Urs Schweizer, 2017. "Efficient Compensation: Lessons from Civil Liability," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 173(1), pages 54-70, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201703)173:1_54:eclfcl_2.0.tx_2-r
    DOI: 10.1628/093245616X14743741664836
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    Cited by:

    1. Lando, Henrik & Schweizer, Urs, 2021. "Causation and the incentives of multiple injurers," International Review of Law and Economics, Elsevier, vol. 68(C).

    More about this item

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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