A Further Justification for the Negligence Rule

Dominique Demougin () and Claude Fluet

No 9801, Cahiers de recherche du Département des sciences économiques, UQAM from Université du Québec à Montréal, Département des sciences économiques

Abstract: We use a principal-agent framework to reexamine the implications of the negligence and strict liability rules when the tort-feasor is an agency. We assume a unilateral care situation and consider both the cases of moral hazard and of adverse selection. In both instances the negligence rule is shown to Pareto dominate the strict liability rule when the activity level is exogenously given. We find a simple condition which guarantees that the result extends to an endogenous activity level. We also examine the case where this condition is not satisfied.

Keywords: Negligence rule; Tort Law; Moral Hazard; Adverse Selection (search for similar items in EconPapers)
JEL-codes: D82 K13 (search for similar items in EconPapers)
Pages: 16
Date: 1998-11
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Citations: View citations in EconPapers (4)

Published in International Review of Law and Economics; 19(1), March 1999, pages 33-45.

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Journal Article: A further justification for the negligence rule (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:cre:uqamwp:9801

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