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The Welfare Implications of Costly
| Content Provider | Semantic Scholar |
|---|---|
| Author | Polinsky, A. Mitchell Rubinfeld, Daniel L. |
| Copyright Year | 2012 |
| Abstract | THE central concern of the economic theory of liability is how to induce an injurer to take the socially appropriate level of care-the level that minimizes the sum of the cost of taking care and the losses to victims.' An important result in this theory is that, assuming litigation is costless, the rule of strict liability with compensatory damages leads the injurer to choose the appropriate level of care. This follows because, under strict liability with compensatory damages, the injurer's problem-minimizing his cost of care plus his cost of liability-is identical to society's problem. The analysis of strict liability with compensatory damages is affected in two ways when litigation costs are taken into account. First, it is no longer true (as was implicitly assumed in the preceding argument) that whenever a victim suffers harm he will sue the injurer; only victims whose losses exceed their cost of litigation will sue. This difference could lead the injurer to take less care (because he will not have to pay for all of the losses he causes) or more care (because, by reducing the harm suffered by victims, he can reduce the number who sue). Second, the social problem |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?amp%3Bcontext=facpubs&article=1270 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
