Screening in Courts: On the Joint Use of Negligence and Causation Standards

25 Pages Posted: 13 Dec 2007 Last revised: 2 Sep 2008

See all articles by Eberhard Feess

Eberhard Feess

Frankfurt School of Finance & Management gemeinnützige GmbH

Gerd Muehlheusser

University of Hamburg; IZA Institute of Labor Economics

Ansgar Wohlschlegel

Portsmouth Business School

Date Written: December 7, 2007

Abstract

In legal systems all over the world, injurers are held liable only when the probability of having caused an accident exceeds a critical threshold (causation standard) and when behaving negligently. In a complete information framework, the joint use of the two instruments is puzzling as both whether a potential injurer has taken due care and whether he meets a specific causation standard depends only on his care level. We explain this puzzle with private information about injurers' avoidance costs, and we show that the joint use of both instruments can be interpreted as a menu of options to induce self-selection of different cost types. Thereby, low-cost firms have higher incentives to take due care, whereas high-cost firms are negligent and aim at escaping liability via the causation standard. We derive conditions under which the joint use of both instruments outperforms the optimal single-instrument policy.

Keywords: liability rules, uncertainty over causation, negligence, threshold probabilities, screening

JEL Classification: K13

Suggested Citation

Feess, Eberhard and Muehlheusser, Gerd and Wohlschlegel, Ansgar, Screening in Courts: On the Joint Use of Negligence and Causation Standards (December 7, 2007). Available at SSRN: https://ssrn.com/abstract=1071071 or http://dx.doi.org/10.2139/ssrn.1071071

Eberhard Feess (Contact Author)

Frankfurt School of Finance & Management gemeinnützige GmbH ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Gerd Muehlheusser

University of Hamburg ( email )

Von Melle Park 5
Hamburg, 20146
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ansgar Wohlschlegel

Portsmouth Business School ( email )

Portsmouth, PO1 3DE
United Kingdom

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