Shared Liability and Excessive Care

Ehud Guttel, Yuval Procaccia and Eyal Winter ()

The Journal of Law, Economics, and Organization, 2021, vol. 37, issue 2, 358-391

Abstract: Extensive literature has shown that assignment of liability for a single harm to multiple injurers undermines incentives for optimal care. As each potential injurer anticipates bearing only a fraction of the harm, incentives to take precautions are often diluted. The dilution-of-liability concern has led theorists to propose sophisticated apportionment rules to restore optimal incentives. This article demonstrates, however, that shared liability also gives rise to the converse risk, namely, it induces injurers—whether subject to negligence or strict liability—to invest excessively in care. Furthermore, unlike its extensively analyzed counterpart, the risk of excessive care arises under any apportionment regime. While apportionment rules cannot eliminate the problem of excessive care, we suggest other means by which the problem can be addressed (JEL D62, D86, K13).

Date: 2021
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