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Ambiguity and Optimal Technological Choice: Does the Liability Regime Matter?

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  • Julien Jacob

Abstract

We consider a firm, from a high-risk industry, facing two available technologies. One of the two technologies is ambiguous in the sense that its probability of accident lies in a interval of objective probabilities. The firm has the possibility to invest in seeking information in order to reduce the uncertainty inherent to the ambiguous technology. We apply a model inspired by Jaffray (1989) on imprecise probabilities to study the firm’s behavior in such a context. Considering a strict liability rule, we compare the impact of two liability regimes, unlimited liability and limited liability, on the firm’s technical choice. Whatever the firm’s information seeking policy, which type of liability regime promotes which technology depends on the relative value of the marginal operating costs of the two technologies.

Suggested Citation

  • Julien Jacob, 2011. "Ambiguity and Optimal Technological Choice: Does the Liability Regime Matter?," Working Papers of BETA 2011-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2011-06
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    File URL: http://beta.u-strasbg.fr/WP/2011/2011-06.pdf
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    Cited by:

    1. Dai, Meixing, 2011. "Motivations and strategies for a real revaluation of the Yuan," MPRA Paper 30440, University Library of Munich, Germany.
    2. Houda Ghaya, 2011. "Board of Directors’ Involvement in Strategic Decision Making Process: Definition and Literature Review," Working Papers of BETA 2011-22, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Julien Jacob, 2011. "Innovation and diffusion in risky industries under liability law: the case of “double-impact” innovations," Working Papers of BETA 2011-24, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Jenny Monheim-Helstroffer & Marie Obidzinski, 2011. "The EU legislation game: the case of asylum law," Working Papers of BETA 2011-16, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

    More about this item

    Keywords

    Technical choice; technological risk; unlimited liability; limited liability; ambiguity.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law

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