Liability Law and Uncertainty Spreading

46 Pages Posted: 7 May 2014

Date Written: February 28, 2014

Abstract

This paper investigates the ability of liability rules to allocate uncertainty. Uncertainty includes both the standard risk and the ambiguity that arises when the causal link between conduct and harm is not conclusive, as is frequently the case with toxic torts. The optimal features of the strict liability rule and the negligence rule are obtained. Strict liability proves superior to negligence when harms are uncorrelated and victims are at least as uncertainty-averse as the injuring party. Negligence is preferable when harms are correlated and victims are numerous. Thus, negligence proves particularly apt to address systematic harms, such as those arising from design defects and warning failures. The main results also apply when accidents are bilateral and when parties can purchase insurance from an uncertainty-averse insurer.

Keywords: products liability, scientific uncertainty, ambiguity, toxic torts.

JEL Classification: K13

Suggested Citation

Franzoni, Luigi Alberto, Liability Law and Uncertainty Spreading (February 28, 2014). Available at SSRN: https://ssrn.com/abstract=2432861 or http://dx.doi.org/10.2139/ssrn.2432861

Luigi Alberto Franzoni (Contact Author)

University of Bologna ( email )

P.zza Scaravilli 2
Bologna, 40124
Italy
0512098488 (Phone)
+39-051-221968 (Fax)

HOME PAGE: https://www.unibo.it/sitoweb/luigi.franzoni/en

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