Correlated Values in the Theory of Property and Liability Rules

Ian Ayres and Paul M. Goldbart

The Journal of Legal Studies, 2003, vol. 32, issue 1, 121-151

Abstract: Louis Kaplow and Stven Shavell have shown that liability rules tend to efficiently harness the defendant’s private information when courts are imperfectly informed as to litigants’ valuations. But they claim that liability rules cannot harness private information when the disputants’ valuations are correlated. This article rejects the correlated-value claim. While correlated valuations create real problems of implementation, Kaplow and Shavell’s own harnessing result can be extended to redeem the usefulness of liability rules. When values are correlated, enlightened courts can enlarge the damages that takers expect to pay so as to induce efficient takings. The relative efficiency of property and liability rules turns out to be independent of whether the disputants’ values are correlated.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://dx.doi.org/10.1086/368009 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:v:32:y:2003:p:121-151

DOI: 10.1086/368009

Access Statistics for this article

More articles in The Journal of Legal Studies from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().