SFB 303 Discussion Paper No. A - 213

Author: Emons, Winand
Title: Efficient Liability Rules for an Economy with Non-identical Individuals
Abstract: This paper is about accident situations involving two risk-neutral parties. Both parties engage in activity levels that are profitable but affect the magnitude of possible bilateral accidents. We analyse how the activity choices can be decentralized by liability rules that assign the costs to the two parties to an accident. We show that rules which share damages are superior to negligence rules where one party bears the entire accident costs.
Keywords: liability law, mechanism design
Creation-Date: November 1988
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