Variable Probabilities of Suit and Liability Rules

Sébastien Rouillon

Cahiers du GREThA (2007-2019) from Groupe de Recherche en Economie Théorique et Appliquée (GREThA)

Abstract: This note provides an additional argument in favour of the use of a negligence rule in tort law. When the probability of suit varies among injurers and is not observable by the judge, the judge will fail to implement the socially optimal level of care using a strict liability rule (for this implies to set damages equal to harm multiplied by the inverse of the probability of suit). However, he can still implement it using a negligence rule, subject to the condition that he chooses the negligence standard properly (for if damages are set large enough, potential injurers will comply with the standard, regardless their probability of suit).

Keywords: Liability; asymmetric information (search for similar items in EconPapers)
JEL-codes: D82 K13 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cta and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:grt:wpegrt:2008-15

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