A Tort for Risk and Endogenous Bankruptcy

Thomas Miceli () and Kathleen Segerson ()

No 2004-24, Working papers from University of Connecticut, Department of Economics

Abstract: Conventional tort law bars victims of exposure to a toxic substance from filing suit until they actually develop symptoms of illness. Practically speaking, this rule often bars recovery due to bankruptcy and causal uncertainty. One solution is to allow victims to file at exposure for expected damages (a tort for risk). The trade-off is that such a rule may trigger a race to file among exposure victims, thereby itself inducing bankruptcy. This paper characterizes the conditions under which such a race will occur in equilibrium and examines the implications for social welfare.

Keywords: Environmental accidents; mass torts; bankruptcy (search for similar items in EconPapers)
JEL-codes: K13 K32 Q27 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law and nep-reg
Date: 2004-09
Note: We acknowledge the very useful comments of David Martimort and an anonymous referee.
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Persistent link: http://EconPapers.repec.org/RePEc:uct:uconnp:2004-24

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