On the efficiency of the negligence rule

Satish Jain

Journal of Economic Policy Reform, 2010, vol. 13, issue 4, 343-359

Abstract: The three versions of the negligence rule discussed in the literature differ regarding whether a negligent injurer is liable for the entire loss or only for the incremental loss; or regarding whether negligence is defined as failure to take at least due care or failure to take a cost‐justified precaution. It is shown in the paper that the incremental version with untaken precaution notion of negligence is not efficient; not even for the unilateral case. The paper also establishes, for the bilateral case, the efficiency of the incremental version with the shortfall‐from‐due‐care way of defining negligence.

Date: 2010
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DOI: 10.1080/17487870.2010.523972

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