Abstract

http://ssrn.com/abstract=1507871
 
 

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Insolvency and Biased Standards - The Case for Proportional Liability


Alexander Stremitzer


UCLA School of Law

Avraham D. Tabbach


Tel Aviv University

November 17, 2009

Yale Economics Department Working Paper No. 75R
Yale Law & Economics Research Paper No. 397

Abstract:     
We analyze liability rules in a setting where injurers are potentially insolvent and where negligence standards may deviate from the socially optimal level. We show that proportional liability, which sets the measure of damages equal to the harm multiplied by the probability that it was caused by an injurer's negligence, is preferable to other existing negligence-based rules. Moreover, proportional liability outperforms strict liability if the standard of due care is not set too low. Our analysis also suggests that courts should rely on statistical evidence and bar individualized causal claims that link the harm suffered by a plaintiff to the actions of the defendant. Finally, we provide a result which might be useful to regulators when calculating minimum capital requirements or minimum mandatory insurance for different industries.

Number of Pages in PDF File: 34

Keywords: Judgment proof problem, Uncertain causation, Court error and misperception, Proportional liability, Disgorgement

JEL Classification: K13

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Date posted: November 17, 2009 ; Last revised: December 20, 2009

Suggested Citation

Stremitzer, Alexander and Tabbach, Avraham D., Insolvency and Biased Standards - The Case for Proportional Liability (November 17, 2009). Yale Economics Department Working Paper No. 75R; Yale Law & Economics Research Paper No. 397. Available at SSRN: http://ssrn.com/abstract=1507871 or http://dx.doi.org/10.2139/ssrn.1507871

Contact Information

Alexander Stremitzer (Contact Author)
UCLA School of Law ( email )
405 Hilgard Avenue
Box 90095-1476
Los Angeles, CA 90095-1476
United States
HOME PAGE: http://www.law.ucla.edu/faculty/all-faculty-profiles/professors/Pages/Alexander-Stremitzer.aspx
Avraham D. Tabbach
Tel Aviv University ( email )
Ramat Aviv
Tel Aviv 69978, IL
Israel
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