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When Will Judgment Proof Injurers Take Too Much Precaution?


Giuseppe Dari-Mattiacci


University of Amsterdam - Amsterdam Center for Law and Economics (ACLE); Tinbergen Institute

Gerrit De Geest


Washington University in Saint Louis - School of Law

December 2003

International Review of Law and Economics, Vol. 26, No. 3, September 2006
George Mason Law & Economics Research Paper No. 03-56

Abstract:     
This article identifies the conditions under which potentially insolvent injurers over-invest in precaution. We show that this may happen only with respect to precautionary measures that reduce the probability of the accident. No such result occurs if precaution only reduces the magnitude of the harm. Contrary to the literature, we find that overprecaution may also occur when precaution is non-monetary. The reason is that overprecaution can be due not only to the implicit precaution-subsidy effect (the fact that care-taking reduces the injurer's exposure to liability when precaution is monetary) but also to a substitution effect between precaution that reduces the probability of accidents and precaution that reduces the magnitude of the harm. Finally, we find that when the injurer's wealth is sufficiently low, precautions may actually be lower when they are monetary than when they are non-monetary, despite the implicit precaution subsidy in the former case.

Number of Pages in PDF File: 12

Keywords: insolvency, judgment proof problem, liability, bankruptcy, overprecaution

JEL Classification: K13, K32

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Date posted: December 11, 2003  

Suggested Citation

Dari-Mattiacci, Giuseppe and De Geest, Gerrit, When Will Judgment Proof Injurers Take Too Much Precaution? (December 2003). International Review of Law and Economics, Vol. 26, No. 3, September 2006; George Mason Law & Economics Research Paper No. 03-56. Available at SSRN: http://ssrn.com/abstract=477042 or http://dx.doi.org/10.2139/ssrn.477042

Contact Information

Giuseppe Dari-Mattiacci
University of Amsterdam - Amsterdam Center for Law and Economics (ACLE) ( email )
Roeterstraat 11
Amsterdam, 1018WB
Netherlands
HOME PAGE: http://darimattiacci.acle.nl
Tinbergen Institute
Roetersstraat 31
Amsterdam, 1018 WB
Netherlands
HOME PAGE: http://scholar.google.com/citations?user=AuUfjxUAAAAJ&hl=en
Gerrit De Geest (Contact Author)
Washington University in Saint Louis - School of Law ( email )
Campus Box 1120
St. Louis, MO 63130
United States
314-398-4941 (Phone)
HOME PAGE: http://www,degeest.wustl..edu
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