IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v37y20063p562-582.html
   My bibliography  Save this article

The Benefits of Extended Liability

Author

Listed:
  • Yolande Hiriart
  • David Martimort

Abstract

We characterize the optimal regulation of a firm that undertakes an environmentally risky activity. This firm (the agent) is protected by limited liability and bound by contract to a stakeholder (the principal). The level of safety care exerted by the agent is nonobservable. This level of care depends both on the degree of incompleteness of the regulatory contract and on the allocation of bargaining power between the principal and the agent. Increasing the wealth of the principal that can be seized upon an accident has no value when private transactions are regulated but might otherwise strictly improve welfare. An incomplete regulation supplemented by an ex post extended liability regime can sometime achieve the second best.

Suggested Citation

  • Yolande Hiriart & David Martimort, 2006. "The Benefits of Extended Liability," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 562-582, Autumn.
    • Handle: RePEc:rje:randje:v:37:y:2006:3:p:562-582
    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. Pei, Di, 2010. "Risk, limited liability and firm scope," MPRA Paper 27416, University Library of Munich, Germany, revised 01 Dec 2010.
    2. Julien Jacob & Sandrine Spaeter, 2016. "Large-Scale Risks and Technological Change: What About Limited Liability?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(1), pages 125-142, February.

    More about this item

    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:37:y:2006:3:p:562-582. 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.