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Risk, Ambiguity and Efficient Liability Rules: An experiment

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  • Nicolas Lampach
  • Kene Boun My
  • Sandrine Spaeter

Abstract

We conduct experiments to study the incentive effects of strict liability by comparing both regimes, unlimited and limited liability in the domain of risk and ambiguity. We assume that the firm’s activities cause a risk of technological disaster and can invest in prevention to reduce the likelihood of accident. We assess Lampach and Spaeter’s theoretical predictions. We find on average high levels of investment under limited liability in the domain of risk, consistent with the theory, but lower level of investment in prevention in the domain of ambiguity. We do not find that subjects’ degree of optimism affect the decision choice albeit we demonstrate strong evidence in favor of inequity aversion, fairness and risk preferences.

Suggested Citation

  • Nicolas Lampach & Kene Boun My & Sandrine Spaeter, 2016. "Risk, Ambiguity and Efficient Liability Rules: An experiment," Working Papers of BETA 2016-30, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2016-30
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    Cited by:

    1. Kene Boun My & Nicolas Lampach & Mathieu Lefebvre, 2016. "Effects of gain-loss frames on social preferences," Working Papers of BETA 2016-21, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. Kene Boun My & Nicolas Lampach & Mathieu Lefebvre & Jacopo Magnani, 2018. "Effects of gain-loss frames on advantageous inequality aversion," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 4(2), pages 99-109, December.

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    More about this item

    Keywords

    Strict liability; Technological disaster; Experiment; Risk; Ambiguity; Optimism.;
    All these keywords.

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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