Efficient Liability Rules for Multi-Party Accidents With Moral Hazard

Eberhard Feess () and Ulrich Hege

Journal of Institutional and Theoretical Economics (JITE), 1998, vol. 154, issue 2, 422-450

Abstract: The economic analysis of tort law is extended to multi-party accidents with unobservable actions. Due to the requirement of no punitive damages, the problem resembles a team production problem. It is shown that asymmetry in the agents' impact on the stochastic damage function can be exploited to improve ex ante incentives. This implies departures from the proportional rule, based on the statistical information contained in the circumstances of the accident. If a noisy monitoring technology is introduced, then monitoring can add enough stochastic identifiability among injurers to restore efficiency.

JEL-codes: D82 G22 K13 K32 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Efficient Liability Rules for Multi-Party Accidents with Moral Hazard (1998)
Working Paper: Efficient liability rules for multi-party accidents with moral hazard (1998)
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