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Commodifying Liability

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  • Cooter, Robert D.

Abstract

In recent years, ingenious entrepreneurs have invented new commodities by bundling contingent claims and marketing them. A liability right can be viewed as a contingent claim and analyzed like stock options or commodity futures. Since law prohibits markets for liability rights, no one knows how they would work. I assume no legal impediments to unbundling, packaging, and selling liability rights. I then predict how a competitive market would price liability rights. I use such an ideal market to critique the actual system of tort liability. Competition can solve many of the problems attributed by courts to contracts that reallocate tort liability.

Suggested Citation

  • Cooter, Robert D., 1997. "Commodifying Liability," Berkeley Olin Program in Law & Economics, Working Paper Series qt9pq4m8ts, Berkeley Olin Program in Law & Economics.
    • Handle: RePEc:cdl:oplwec:qt9pq4m8ts
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    References listed on IDEAS

    as
    1. Robert D. Cooter, 1991. "Economic Theories of Legal Liability," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 11-30, Summer.
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    4. George L. Priest, 1991. "The Modern Expansion of Tort Liability: Its Sources, Its Effects, and Its Reform," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 31-50, Summer.
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    7. A. Mitchell Polinsky & Yeon-Koo Che, 1991. "Decoupling Liability: Optimal Incentives for Care and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 562-570, Winter.
    8. Starrett, David A., 1972. "Fundamental nonconvexities in the theory of externalities," Journal of Economic Theory, Elsevier, vol. 4(2), pages 180-199, April.
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    12. Cooter, Robert D & Rubinfeld, Daniel L, 1994. "An Economic Model of Legal Discovery," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 435-463, January.
    13. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-157, January.
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