Abstract

http://ssrn.com/abstract=237350
 
 

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Corporate Risk Analysis: A Reckless Act?


W. Kip Viscusi


Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics


Stanford Law Review, Vol. 52, No. 3, 2000

Abstract:     
Balancing of risk and cost lies at the heart of standard negligence tests and policy analysis approaches to government regulation. Notwithstanding the desirability of using a benefit-cost approach to assess the merits of safety measures, in many court cases juries appear to penalize corporations for having done a risk analysis in instances in which the company decided not to make a safety improvement after the analysis indicated the improvement was unwarranted. Automobile accident cases provide the most prominent examples of such juror sanctions. This paper tests the effect of corporate risk analyses experimentally by using a sample of almost 500 juror-eligible citizens. Each individual considered an automobile accident scenario, but these scenarios differed in terms of whether the company undertook a risk analysis and in terms of the nature of the risk analysis. Somewhat surprisingly, even sound benefit-cost analyses of safety measures did not reduce the likelihood of punitive damages. If a company follows the procedures used by government agencies and uses a higher value of life in its analyses, the penalty levied on the corporation Increases. Internal use of higher value of life numbers serves as an anchor that boosts rather than reduces jury awards.

Accepted Paper Series


Not Available For Download

Date posted: August 21, 2000  

Suggested Citation

Viscusi, W. Kip, Corporate Risk Analysis: A Reckless Act?. Stanford Law Review, Vol. 52, No. 3, 2000. Available at SSRN: http://ssrn.com/abstract=237350

Contact Information

W. Kip Viscusi (Contact Author)
Vanderbilt University - Law School ( email )
131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7715 (Phone)
615-322-5953 (Fax)
HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Vanderbilt University - Department of Economics
Box 1819 Station B
Nashville, TN 37235
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)
HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm
Vanderbilt University - Owen Graduate School of Management
401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)
HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm
Vanderbilt University - Strategy and Business Economics ( email )
Nashville, TN 37203
United States

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