A Fundamental Enforcement Cost Advantage of the Negligence Rule over Regulation

Steven Shavell

The Journal of Legal Studies, 2013, vol. 42, issue 2, 275 - 302

Abstract: Regulation and the negligence rule are both designed to obtain compliance with desired standards of behavior, but they differ in a primary respect: compliance with regulation is ordinarily assessed independently of the occurrence of harm, whereas compliance with the negligence rule is evaluated only if harm occurs. It is shown in a stylized model that because the use of the negligence rule is triggered by harm, the rule enjoys an intrinsic enforcement cost advantage over regulation. Moreover, this cost advantage suggests that the examination of behavior under the negligence rule should often be more detailed than under regulation--as it frequently is in fact.

Date: 2013
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