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  • Bell Journal of Economics

On the Optimal Structure of Liability Laws

By: Jerry R. Green
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Abstract

We consider the control of tvo-party accidents through the use of liability rules that assign damages according to whether or not predetermined standards for care have been met. Particular emphasis is given to how the differential in the costs of accident avoidance activities affects the optimal legal rule and optimal care standards. It is shown that when the costs are close to uniform across individuals, an approximation to thefirst-best can be obtained. Moreover, alternative legal rules are equally efficient in achieving this situation. Whien the differential wvidens, legal rules will differ in their ability to reach the second-best. In contrast to previous models of liability law, it is shown that the courts must play an active adjudicatory role in the optimal solution.

Keywords

Legal Liability; Law

Citation

Green, Jerry R. "On the Optimal Structure of Liability Laws." Bell Journal of Economics 7, no. 2 (Fall 1976): 553–574.
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About The Author

Jerry R. Green

Negotiation, Organizations & Markets
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More from the Author
  • Two Representations of Information Structures and Their Comparisons By: Jerry R. Green and Nancy L. Stokey
  • Assent-maximizing Social Choice By: Katherine A. Baldiga and Jerry R. Green
  • Let the Right One In: A Microeconomic Approach to Partner Choice in Mutualisms By: Marco Archetti, Francisco Ubeda, Drew Fudenberg, Jerry R. Green, Naomi E. Pierce and Douglas W. Yu
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