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Efficiency of liability rules: A reconsideration

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  • Satish Jain

Abstract

In the mainstream of law and economics the notion of negligence is defined as the failure to take at least the legally specified due care level. In the standard tort model, with this notion of negligence, the efficient liability rules are characterized by the condition of negligence liability, which requires that if one party is negligent and the other non-negligent then the entire accident loss must be borne by the negligent party. This paper is concerned with the question of efficiency of liability rules when the notion of negligence is defined as failure to take some cost-justified precaution. The main result of the paper shows that there does not exist any liability rule which is efficient when negligence is identified by the existence of some cost-justified untaken precaution.

Suggested Citation

  • Satish Jain, 2006. "Efficiency of liability rules: A reconsideration," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(3), pages 359-373.
    • Handle: RePEc:taf:jitecd:v:15:y:2006:i:3:p:359-373
    DOI: 10.1080/09638190600871685
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    References listed on IDEAS

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    1. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
    2. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    3. Miceli, Thomas J., 1996. "Cause in fact, proximate cause, and the hand rule: Extending Grady's positive economic theory of negligence," International Review of Law and Economics, Elsevier, vol. 16(4), pages 473-482, December.
    4. Satish K. Jain & Ram Singh, 2002. "Efficient Liability Rules: Complete Characterization," Journal of Economics, Springer, vol. 75(2), pages 105-124, March.
    5. Kahan, Marcel, 1989. "Causation and Incentives to Take Care under the Negligence Rule," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 427-447, June.
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    Cited by:

    1. Kundu, Rajendra P. & Kaur, Harshil, 2022. "Efficient simple liability assignment rules: A complete characterization," Mathematical Social Sciences, Elsevier, vol. 116(C), pages 22-31.
    2. Papiya Ghosh & Rajendra P. Kundu, 2023. "Decomposition of accident loss and decoupled liability assignment: A class of negligence rules," Indian Economic Review, Springer, vol. 58(1), pages 119-140, June.
    3. Papiya Ghosh & Rajendra P. Kunda, 2021. "Decomposition of accident loss and decoupled liability assignment: A class of negligencerules," Working Papers 2157, Indian Institute of Foreign Trade.

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