Private Law Theory

ABSTRACT
Conventional wisdom asserts that legal uncertainty in the determination of liability distorts the incentives of injurers to take care. Mild (severe) legal uncertainty induces injurers to over-comply (under-comply) with the standard of care, leading to inefficiency. We show that these results hinge on the assumption that legal uncertainty is exogenously set. When legal uncertainty is endogenously determined, in a game between an injurer and a victim, it becomes irrelevant since the level of care in equilibrium is always efficient.

Tabbach, Avraham D and Cohen, Alon, The Irrelevance of Legal Uncertainty (September 26, 2024).