Disgorgement Damages for Accidents

32 Pages Posted: 29 May 2014 Last revised: 30 Apr 2015

See all articles by Robert D. Cooter

Robert D. Cooter

University of California, Berkeley - School of Law

Ariel Porat

Tel Aviv University; University of Chicago - Law School

Date Written: April 25, 2015

Abstract

Under the usual tort rules, damages for an accident equal the victim’s loss (compensation). This paper departs from current law by proposing damages equal to the injurer’s gain from untaken precaution divided by the probability of liability (disgorgement damages for accidents, or DDA). DDA is the minimum liability necessary to provide injurers with efficient incentives for care. DDA is smaller than compensation, so it typically induces more activity by injurers and less activity by victims. Calculating DDA generally requires different information than compensation. Consequently, some imperfections in information cause courts to distort incentives for care under compensatory damages and not DDA, while others have the opposite effect. Furthermore, the smaller size of damages under DDA compared to compensation can shrink or magnify the distortion in incentives for care caused by court and injurer errors. We distinguish three forms of DDA with different information requirements and the same incentive effects.

Suggested Citation

Cooter, Robert D. and Porat, Ariel, Disgorgement Damages for Accidents (April 25, 2015). Journal of Legal Studies, Vol. 44, 2015; University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 688; UC Berkeley Public Law Research Paper No. 2439986. Available at SSRN: https://ssrn.com/abstract=2439986 or http://dx.doi.org/10.2139/ssrn.2439986

Robert D. Cooter

University of California, Berkeley - School of Law ( email )

Berkeley, CA 94720-7200
United States
510-642-0503 (Phone)
510-642-3767 (Fax)

Ariel Porat (Contact Author)

Tel Aviv University ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel
972-3-6408283 (Phone)
972-3-6407260 (Fax)

HOME PAGE: http://english.tau.ac.il/profile/porata

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

HOME PAGE: http://www.law.uchicago.edu/faculty/porat

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