The Joint Use of Regulation and Strict Liability with Multidimensional Care and Uncertain Conviction

35 Pages Posted: 27 Nov 2007

See all articles by Bharat Bhole

Bharat Bhole

Rochester Institute of Technology

Jeffrey Wagner

Rochester Institute of Technology (RIT)

Abstract

The purpose of this paper is to explore the joint use of regulation and strict liability when firms can take care in both observable and unobservable dimensions and when the firm's conviction for damages is uncertain. Much of the literature concerning joint use regards management of the judgment-proof problem; the take-home result of our paper is that if the harming party can take both observable and unobservable care, then joint use can improve welfare even in the absence of judgment-proofness. This is true even when penalty multipliers are allowed, provided social welfare is negatively related to the firm's expected liability costs. In fact, use of penalty multipliers further strengthens the case for joint use.

Keywords: Strict Liability, Regulation, Joint Use, Penalty Multipliers, Judgment Proof Problem

JEL Classification: K13, K32

Suggested Citation

Bhole, Bharat and Wagner, Jeffrey, The Joint Use of Regulation and Strict Liability with Multidimensional Care and Uncertain Conviction. International Review of Law and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1032376

Bharat Bhole (Contact Author)

Rochester Institute of Technology ( email )

92 Lomb Memorial Drive
Rochester, NY 14623-5604
United States

HOME PAGE: http://www.rit.edu/~blbgse

Jeffrey Wagner

Rochester Institute of Technology (RIT) ( email )

Rochester, NY 14623
United States

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