Civil Liability, Knight’s Uncertainty and Non-Dictatorial Regulator

Gerard Mondello

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Abstract: This paper reviews the foundations of the unilateral standard accident model under Knightian uncertainty. It extends the Teitelbaum (2007)'s seminal article (who introduces radical uncertainty) by expanding it from producers to victims and from the probability distribution of accidents to the scale of damage. Mainly, it also considers a regulator who aggregates the agents' preferences (Neghisi (1960) type). Under the condition that the troublemakers' resources are sufficient to cover the damage, the article shows that uncertainty does not preclude, first, the determination of a socially optimal level of care, and second, whatever the civil liability regime (strict liability or negligence) it shows that they determine the same level of socially first-best care. The solution is inefficient only when the polluter's wealth is insufficient to repair the victim's losses.

Keywords: Tort Law; Ambiguity Theory; Strict Liability; Negligence Rule; Liability Regimes equivalence (search for similar items in EconPapers)
Date: 2021-12-26
New Economics Papers: this item is included in nep-his
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03502617
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Working Paper: Civil Liability, Knight’s Uncertainty and Non-Dictatorial Regulator (2015)
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