Optimal Liability for Optimistic Tortfeasors

31 Pages Posted: 8 Feb 2013

See all articles by Barbara Luppi

Barbara Luppi

University of St. Thomas School of Law; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics

Francesco Parisi

University of Minnesota - Law School; University of Bologna

Date Written: February 6, 2013

Abstract

As Alicke and Govorun (2005, p. 85) observed, “most people are average, but few people believe it.” Optimism and other forms of inflated perception of the self lead parties to exercise suboptimal precautions when undertaking risky activities and often undermine the incentive effects of tort rules. In this paper, we analyze two forms of optimism: the “better-than average effect” and the “blind spot bias.” Taken together, these biases undermine several critical assumptions, upon which law and economics scholars have relied when modeling the incentive effects of tort law. The better-than-average effect hinders a person’s ability to assess risk, and the blind spot bias prevents her from fully correcting her misperceptions. In this paper, we construct a model representing the incentives of “optimistic” tortfeasors and victims, and consider mechanisms for mitigating the effects of biased decision-making. We discover the surprising conclusion that in some circumstances, the most effective strategy for mitigating the effects of optimistic misperceptions may simply be to “forgive” them — i.e., to shield biased individuals from liability, rather than holding them liable for the harms they cause.

Keywords: optimism bias, better-than-average effect, blind-spot bias, forgiveness strategies

JEL Classification: K13, K43, D03, D81

Suggested Citation

Luppi, Barbara and Parisi, Francesco, Optimal Liability for Optimistic Tortfeasors (February 6, 2013). Minnesota Legal Studies Research Paper No. 13-06. Available at SSRN: https://ssrn.com/abstract=2212943 or http://dx.doi.org/10.2139/ssrn.2212943

Barbara Luppi

University of St. Thomas School of Law

2115 Summit Avenue
Saint Paul, MN 55105
United States

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )

Viale Berengario 51
41100 Modena, Modena 41100
Italy

Francesco Parisi (Contact Author)

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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