IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v36y20051p63-77.html
   My bibliography  Save this article

Minimum Asset Requirements and Compulsory Liability Insurance as Solutions to the Judgment-Proof Problem

Author

Listed:
  • Steven Shavell

    (Harvard Law School)

Abstract

Minimum asset and liability insurance requirements must often be met in order for parties to participate in potentially harmful activities. Such financial responsibility requirements may improve parties' decisions whether to engage in harmful activities and, if so, their efforts to reduce risk. However, the requirements may undesirably prevent some parties with low assets from engaging in activities. Liability insurance requirements tend to improve incentives to reduce risk when insurers can observe levels of care but dilute incentives when they cannot observe levels of care. In the latter case, compulsory liability insurance may be inferior to asset requirements.

Suggested Citation

  • Steven Shavell, 2005. "Minimum Asset Requirements and Compulsory Liability Insurance as Solutions to the Judgment-Proof Problem," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 63-77, Spring.
    • Handle: RePEc:rje:randje:v:36:y:2005:1:p:63-77
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mondello, Gérard, 2015. "Splitting nuclear parks or not? The third party liability role," Energy Economics, Elsevier, vol. 51(C), pages 553-559.
    2. Yeon‐Koo Che & Kathryn E. Spier, 2008. "Strategic judgment proofing," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 926-948, December.
    3. Pierre Bentata, 2014. "Liability as a complement to environmental regulation: an empirical study of the French legal system," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(3), pages 201-228, July.
    4. Bisso, Juan Carlos & Choi, Albert H., 2008. "Optimal agency contracts: The effect of vicarious liability and judicial error," International Review of Law and Economics, Elsevier, vol. 28(3), pages 166-174, September.
    5. Frank A. Sloan & Patricia A. Robinson & Lindsey M. Eldred, 2014. "Does Private Information Influence Automobile Insurance Purchase Decisions?," NBER Working Papers 20679, National Bureau of Economic Research, Inc.
    6. Kim, Chulyoung & Koh, Paul S., 2019. "Minimum Asset and Liability Insurance Requirements on Judgment-Proof Individuals When Harm is Endogenous," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 60(2), pages 141-161, December.
    7. Pierre Fauvet & Sébastien Rouillon, 2016. "Would you trust lobbies?," Public Choice, Springer, vol. 167(3), pages 201-219, June.
    8. Schweizer, Urs, 2011. "Vicarious Liability and the Intensity Principle," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 364, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Gérard Mondello, 2017. "Lenders and Risky Activities: Strict Liability or Negligence Rule?," GREDEG Working Papers 2017-13, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    10. Friehe, Tim & Langlais, Eric, 2017. "Prevention and cleanup of dynamic harm under environmental liability," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 107-120.
    11. Mondello, Gérard, 2012. "La responsabilité environnementale des prêteurs : difficultés juridiques et ensemble des possibles," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(2), pages 257-278, Juin.
    12. Farmer, Amy & Pecorino, Paul, 2017. "Litigation with judgment proof defendants," International Review of Law and Economics, Elsevier, vol. 49(C), pages 1-9.
    13. Gérard Mondello, 2021. "Lenders' liability and ultra-hazardous activities," Post-Print halshs-03502693, HAL.
    14. Tim Friehe, 2008. "On judgment proofness in the case of bilateral harm," European Journal of Law and Economics, Springer, vol. 26(2), pages 175-185, October.
    15. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc.
    16. Revesz, Richard & Stavins, Robert, 2004. "Environmental Law and Policy," Working Paper Series rwp04-023, Harvard University, John F. Kennedy School of Government.
    17. Kim, Byung-Cheol & Oliver, Matthew E., 2017. "Taming drillers through legislative action: Evidence from Pennsylvania’s shale gas industry," Resource and Energy Economics, Elsevier, vol. 50(C), pages 15-35.
    18. Runze Yang & Ruigang Zhang, 2022. "Environmental Pollution Liability Insurance and Corporate Performance: Evidence from China in the Perspective of Green Development," IJERPH, MDPI, vol. 19(19), pages 1-18, September.
    19. Eyer, Jonathan, 2018. "The effect of firm size on fracking safety," Resource and Energy Economics, Elsevier, vol. 53(C), pages 101-113.
    20. Jacob Julien, 2021. "The (Mixed) Effects of Minimum Asset Requirements When There is a Possibility of Technological Change," Review of Law & Economics, De Gruyter, vol. 17(1), pages 167-191, March.
    21. Tim Friehe, 2011. "On being asset-constrained in litigation contests," Public Choice, Springer, vol. 147(3), pages 277-284, June.
    22. Tim Friehe & Christoph Rössler & Elisabeth Schulte, 2023. "Probing the case for manufacturer liability for harms caused by judgment-proof consumers to others," European Journal of Law and Economics, Springer, vol. 56(3), pages 443-460, December.
    23. Arbel, Yonathan A., 2016. "Shielding of assets and lending contracts," International Review of Law and Economics, Elsevier, vol. 48(C), pages 26-35.
    24. D’Antoni, Massimo & Tabbach, Avraham D., 2014. "Inadequate compensation and multiple equilibria," International Review of Law and Economics, Elsevier, vol. 38(C), pages 33-47.
    25. Tim Friehe, 2007. "A note on judgment proofness and risk aversion," European Journal of Law and Economics, Springer, vol. 24(2), pages 109-118, October.

    More about this item

    Keywords

    Criteria for Decision-Making under Risk and Uncertainty Insurance; Insurance Companies Insurance; Risk;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:36:y:2005:1:p:63-77. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.rje.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.