INTRODUCTION
… In this study, it has been our endeavour to find an efficient liability rule under limited information. Learning from the earlier results, we propose a two-step liability rule: the rule of negligence with the defence of relative negligence. We will prove that this rule has a unique Nash equilibrium at the socially optimal levels of care for the non-cooperative game, and therefore induces both parties to adopt socially optimal behaviour.
The organisation of this paper is as follows: In Section 2, we briefly lay down the mathematical formulation adopted in economic analysis of accident law, including a mathematical representation of some common liability rules. In Section 3, we show two different approaches commonly adopted to determine negligence (‘the standard of care’) in cases where only limited information is available. In Section 4, we define the proposed liability rule, and prove that this rule has a unique Nash equilibrium at socially optimal levels even under a limited information regime, and therefore leads to efficient outcomes. Inferences from the results obtained are presented in Section 5.
Astha Srivastava and Ankur Srivastava, Economic Analysis of Accident Law: A New Liability Rule that Induces Socially Optimal Behaviour in Case of Limited Information, Review of Law and Economics, https://doi.org/10.1515/rle-2019-0049. Published online: 16 November 2020.
First posted 2020-11-20 17:33:52
Leave a Reply