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Laws and Norms: Experimental Evidence with Liability Rules

Bruno Deffains (), Romain Espinosa () and Claude Fluet ()
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Bruno Deffains: Centre de Recherches en Droit et Economie (CRED) - UP2 - Université Panthéon-Assas
Romain Espinosa: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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Abstract: We conduct an experiment where participants choose between actions that provide private benefits but may also impose losses on others. Three legal environments are compared: no law, strict liability for harm caused to third parties, and an efficiently designed negligence rule where damages are paid only when the harmful action generates a net social loss. Legal obligations are either perfectly enforced (Severe Law) or only weakly so (Mild Law), i.e., expected sanctions are then nondeterrent. We find that behavior can be rationalized in terms of individuals trading-off private benefits, net of legal liability, against the net uncompensated losses caused to others. The weight associated with non incentivized efficiency concerns is increased by the introduction of a liability rule, whether deterrent or not, and there is evidence that the effect is stronger under strict liability than under the negligence rule.

Keywords: Behavioral law and economics; liability rules; social norms; social preferences; legal norms (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-soc
Date: 2019
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Published in International Review of Law and Economics, Elsevier, inPress

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Working Paper: Laws and Norms: Experimental Evidence with Liability Rules (2017) Downloads
Working Paper: Laws and Norms: Experimental Evidence with Liability Rules (2017) Downloads
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