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The Failure of Decoupling Liability and Other Mistakes in Tort Law

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  • baffi, enrico

Abstract

In this paper I want to demonstrate that it is not possible, with traditional liability rules, to have one party that takes an efficient level of precaution. Both parties, whaever is the rule, take an excessive level of precaution. The problem is that, when we try to calculate the costs of an activity, we dconsider also the cost of precaution of the other party, but this is not usually done. Also the introduction of a tax (the solution called as "decoupling liability") does not solve the problem because the party who pays the tax does not consider the cost of precaution of the other party. This way of reasoning is instead wrog in unilateral accident where a party does not take precautions. In this case an efficient level of activity is reached. Due to these considerations some traditional conclusions about tort liabiity should be reconsidered

Suggested Citation

  • baffi, enrico, 2012. "The Failure of Decoupling Liability and Other Mistakes in Tort Law," MPRA Paper 42242, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42242
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    References listed on IDEAS

    as
    1. Guiseppe Dari Mattiaci & F. Parisi, 2003. "The Economics of Tort Law: A Précis," Working Papers 03-13, Utrecht School of Economics.
    2. 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.
    3. Miceli, Thomas J., 1997. "Economics of the Law: Torts, Contracts, Property, Litigation," OUP Catalogue, Oxford University Press, number 9780195103908.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    The ineffciency of decoupling liability; the impossibility of a have a party to take an efficient level of precaution; some problems with Shavell Theorem;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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