Loss Sharing between Non-Negligent Parties

Amsterdam Law School Research Paper No. 2011-07

Amsterdam Center for Law & Economics Working Paper No. 2011-08

Minnesota Legal Studies Research Paper No. 11-24

32 Pages Posted: 31 May 2011 Last revised: 13 Sep 2011

See all articles by Giuseppe Dari‐Mattiacci

Giuseppe Dari‐Mattiacci

University of Amsterdam; Tinbergen Institute

Bruno Lovat

University of Lorraine - Universite Nancy 2

Francesco Parisi

University of Minnesota - Law School; University of Bologna

Date Written: May 26, 2011

Abstract

In this paper, we study the effects and desirability of legal rules that allow the sharing of an accident loss between a non-negligent injurer and his non-negligent victim. In order to identify the virtues and limits of loss-sharing rules, we begin by considering the effect of a loss-sharing regime on parties' incentives. We address an unresolved issue in the literature, exploring whether loss-sharing in equilibrium undermines the parties' primary care incentives. We establish the conditions under which loss-sharing may be desirable and characterize the regime providing the best overall incentives to minimize the social cost of accidents. Our results indicate that loss-sharing may indeed be desirable in a vast range of situations. The results are later extended to consider the effect of parties' uncertainty in a loss-sharing regime and reveal that loss-sharing may at the same time be desirable and unnecessary in real-life accident law.

Keywords: tort, loss-sharing, negligence, strict liability, comparative fault

JEL Classification: K13, K32

Suggested Citation

Dari-Mattiacci, Giuseppe and Lovat, Bruno and Parisi, Francesco, Loss Sharing between Non-Negligent Parties (May 26, 2011). Amsterdam Law School Research Paper No. 2011-07, Amsterdam Center for Law & Economics Working Paper No. 2011-08, Minnesota Legal Studies Research Paper No. 11-24, Available at SSRN: https://ssrn.com/abstract=1853423 or http://dx.doi.org/10.2139/ssrn.1853423

Giuseppe Dari-Mattiacci (Contact Author)

University of Amsterdam ( email )

Postbus 15654
1001 ND
Amsterdam, Noord-Holland 1001 ND
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Bruno Lovat

University of Lorraine - Universite Nancy 2 ( email )

Nancy
France

Francesco Parisi

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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