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Optimal Assignment of Liabilities

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  • González, Patrick

Abstract

I characterize a generalization of the negligence rule to assign compensating damages in an accident involving multiple tortfeasors. These tortfeasors have the opportunity to undertake spending in prevention and the rule is designed to provide them with the best incentives to do so. I study the case where liability is constraint in the sense that the optimal amount of effort (not constrained by liability) cannot be implemented. The optimal multi-player rule is to apply the negligence rule to the most liable player (the "deep-pocket" or the "victim", defined as the player who is the most responsive to monetary incentives under the strict liability rule) and the strict liability rule to everybody else.

Suggested Citation

  • González, Patrick, 2003. "Optimal Assignment of Liabilities," Cahiers de recherche 0305, GREEN.
    • Handle: RePEc:lvl:lagrcr:0305
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    File URL: http://www.green.ecn.ulaval.ca/CahiersGREEN2003/03-05.pdf
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    References listed on IDEAS

    as
    1. Grady, Mark F, 1990. "Multiple Tortfeasors and the Economy of Prevention," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 653-678, June.
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    9. Harold Winter, 2002. "An Economic Analysis of A Hybrid Liability Rule," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 704-710, October.
    10. Kornhauser, Lewis A. & Revesz, Richard L., 1989. "Apportioning Damages Among Potentially Insolvent Actors," Working Papers 89-22, C.V. Starr Center for Applied Economics, New York University.
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    13. Satish K. Jain & Ram Singh, 2002. "Efficient Liability Rules: Complete Characterization," Journal of Economics, Springer, vol. 75(2), pages 105-124, March.
    14. Winand Emons & Joel Sobel, 1991. "On the Effectiveness of Liability Rules when Agents are not Identical," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 375-390.
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    More about this item

    Keywords

    Negligence rule; limited liability; multiple tortfeasors;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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