
Abstract
The present paper provides an economic analysis of vicarious liability that takes information rents and monitoring costs to be borne by the principal explicitly into account. In the presence of information rents or if the principal is wealth constrained herself, vicarious liability need not generate efficient precaution incentives. Rather, precaution incentives turn out to depend on the exact quantum of damages specified by courts. I shall compare incentives under three damages regimes: strict liability, the traditional negligence rule, and proportional liability. To do so, I make use of the intensity principle that allows to rank damages regimes based on the monotonicity of differences of the principal's expected payof f as a function of induced precaution.
Item Type: | Paper |
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Keywords: | vicarious liability, precaution incentives, judgement-proof principals and agents, discrepancy between private and social costs |
Faculties: | Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A5 - Unvollständige Vertragsbeziehungen und die Gestaltung von Residualrechten |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | K13, D62 |
URN: | urn:nbn:de:bvb:19-epub-13190-8 |
Language: | English |
Item ID: | 13190 |
Date Deposited: | 10. Jul 2012, 13:06 |
Last Modified: | 04. Nov 2020, 12:53 |