Abstract

http://ssrn.com/abstract=2212943
 


 



Optimal Liability for Optimistic Tortfeasors


Barbara Luppi


Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; University of St. Thomas School of Law

Francesco Parisi


University of Minnesota - Law School; University of Bologna

February 6, 2013

Minnesota Legal Studies Research Paper No. 13-06

Abstract:     
As Alicke and Govorun (2005, p. 85) observed, “most people are average, but few people believe it.” Optimism and other forms of inflated perception of the self lead parties to exercise suboptimal precautions when undertaking risky activities and often undermine the incentive effects of tort rules. In this paper, we analyze two forms of optimism: the “better-than average effect” and the “blind spot bias.” Taken together, these biases undermine several critical assumptions, upon which law and economics scholars have relied when modeling the incentive effects of tort law. The better-than-average effect hinders a person’s ability to assess risk, and the blind spot bias prevents her from fully correcting her misperceptions. In this paper, we construct a model representing the incentives of “optimistic” tortfeasors and victims, and consider mechanisms for mitigating the effects of biased decision-making. We discover the surprising conclusion that in some circumstances, the most effective strategy for mitigating the effects of optimistic misperceptions may simply be to “forgive” them — i.e., to shield biased individuals from liability, rather than holding them liable for the harms they cause.

Number of Pages in PDF File: 31

Keywords: optimism bias, better-than-average effect, blind-spot bias, forgiveness strategies

JEL Classification: K13, K43, D03, D81

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Date posted: February 8, 2013  

Suggested Citation

Luppi, Barbara and Parisi, Francesco, Optimal Liability for Optimistic Tortfeasors (February 6, 2013). Minnesota Legal Studies Research Paper No. 13-06. Available at SSRN: http://ssrn.com/abstract=2212943 or http://dx.doi.org/10.2139/ssrn.2212943

Contact Information

Barbara Luppi
Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )
Viale Berengario 51
41100 Modena, Modena 41100
Italy
University of St. Thomas School of Law
MN
United States
Francesco Parisi (Contact Author)
University of Minnesota - Law School ( email )
229 19th Avenue South
Minneapolis, MN 55455
United States
University of Bologna ( email )
Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
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