This paper studies alternative care situations in which the injurer is liable for harm but the victim is only partially compensated for her losses, for example, because the accident will result in serious bodily injury or death. In these situations, liability gives rise to multiple equilibria, some of them inefficient. We analyze possible solutions to the multiple equilibria problem including precaution costs liability and regulation. Notably, we show that in a dynamic setting punitive damages do not eliminate the inefficient equilibrium, but make its attainment less likely; we thus provide a novel justification for punitive damages which is consistent with legal doctrine and practice. Our analysis illustrates the importance of compensating victims, when feasible, rather than merely burdening injurers, for efficiency purposes. This suggests that common theoretical conclusions on accuracy in assessing damages and on decoupling damages and compensation, which leave victims only partially compensated, may not apply.

D'Antoni, M.A., Tabbach, A. (2014). Inadequate compensation and multiple equilibria. INTERNATIONAL REVIEW OF LAW AND ECONOMICS, 38, 33-47 [10.1016/j.irle.2014.02.003].

Inadequate compensation and multiple equilibria

D'ANTONI, MASSIMO ANDREA;
2014-01-01

Abstract

This paper studies alternative care situations in which the injurer is liable for harm but the victim is only partially compensated for her losses, for example, because the accident will result in serious bodily injury or death. In these situations, liability gives rise to multiple equilibria, some of them inefficient. We analyze possible solutions to the multiple equilibria problem including precaution costs liability and regulation. Notably, we show that in a dynamic setting punitive damages do not eliminate the inefficient equilibrium, but make its attainment less likely; we thus provide a novel justification for punitive damages which is consistent with legal doctrine and practice. Our analysis illustrates the importance of compensating victims, when feasible, rather than merely burdening injurers, for efficiency purposes. This suggests that common theoretical conclusions on accuracy in assessing damages and on decoupling damages and compensation, which leave victims only partially compensated, may not apply.
2014
D'Antoni, M.A., Tabbach, A. (2014). Inadequate compensation and multiple equilibria. INTERNATIONAL REVIEW OF LAW AND ECONOMICS, 38, 33-47 [10.1016/j.irle.2014.02.003].
File in questo prodotto:
File Dimensione Formato  
2014,IRLE,Inadequate compensation and multiple equilibria.pdf

non disponibili

Tipologia: Abstract
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 799.61 kB
Formato Adobe PDF
799.61 kB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11365/45845
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo