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Accident Law: An Excessive Standard May Be Efficient

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  • Laszlo Goerke

Abstract

In a world with risk-neutral agents, liability rules will only induce efficient behaviour if these rules impose the full (marginal) costs of an action on the parties. However, institutional restrictions or bilateral activity choices can prevent the full internalisation of costs. A mechanism is proposed which guarantees an efficient outcome: monetary fines which are not related to the occurrence of an accident. Such a mechanism requires individuals to violate the standard of care in order to trigger fine payments. Hence, efficiency needs an excessive standard.

Suggested Citation

  • Laszlo Goerke, 2001. "Accident Law: An Excessive Standard May Be Efficient," CESifo Working Paper Series 625, CESifo.
    • Handle: RePEc:ces:ceswps:_625
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    File URL: https://www.cesifo.org/DocDL/cesifo_wp625.pdf
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    References listed on IDEAS

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    4. Tullock, Gordon, 1981. "Negligence again," International Review of Law and Economics, Elsevier, vol. 1(1), pages 51-62, June.
    5. Jerry Green, 1976. "On the Optimal Structure of Liability Laws," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 553-574, Autumn.
    6. Shavell, Steven, 1993. "The Optimal Structure of Law Enforcement," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 255-287, April.
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