Loss-sharing between Nonnegligent Parties

Giuseppe Dari-Mattiacci, Bruno Lovat and Francesco Parisi

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: Shavell (1980) established that all existing tort regimes fail to incentivize optimal activity levels. The bearer of residual loss adopts a socially optimal activity level, however the non-bearer of residual loss will adopt an excessive level of activity. In this paper, we explore alternative liability rules, which distribute the cost of accidents between non-negligent parties, effectively rendering both parties (injurer and victim) partial residual bearers of loss. We introduce a bilateral accident model with care and activity levels, assuming risk neutrality. We determine conditions where loss-sharing for nonnegligent torts may be a desirable alternative for policymakers, and analyze the social cost of accidents under such shared-liability regimes. We also extend our analysis to account for role-uncertainty of the parties, as well as real-world implications for tort law.

Keywords: tort; loss-sharing; negligence; strict liability; comparative fault; role-uncertainty. (search for similar items in EconPapers)
JEL-codes: K13 K32 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Loss-Sharing between Nonnegligent Parties (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2014-06

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