14 The B.E. Journal of Theoretical Economics 371 (2014)
27 Pages Posted: 7 Apr 2014 Last revised: 17 Sep 2015
Date Written: April 7, 2014
In important areas like medical malpractice and environmental torts, injurers are potentially insolvent and courts may make errors in determining liability (e.g. due to hindsight bias). We show that proportional liability, which holds a negligent injurer liable for harm discounted with the probability that the harm was caused by the injurer’s negligence, is less susceptible to these imperfections and therefore socially preferable to all other liability rules currently contemplated by courts. We also provide a result which might be useful to regulators when calculating minimum capital requirements or minimum mandatory insurance for different industries.
Keywords: compliance, uncertain causation, court error, judgment-proof problem, proportional liability
JEL Classification: K13
Suggested Citation: Suggested Citation
Stremitzer, Alexander and Tabbach, Avraham D., The Robustness Case for Proportional Liability (April 7, 2014). 14 The B.E. Journal of Theoretical Economics 371 (2014); UCLA School of Law, Law-Econ Research Paper No. 14-06. Available at SSRN: https://ssrn.com/abstract=2422042