The Signal-Tuning Function of Liability Regimes

28 Pages Posted: 30 Aug 2017 Last revised: 6 Jul 2018

See all articles by Claude Fluet

Claude Fluet

Université Laval

Murat C. Mungan

George Mason University - Antonin Scalia Law School, Faculty

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Date Written: August 28, 2017

Abstract

Fault-based liability regimes require an inquiry into the nature of the defendant's conduct, whereas this type of inquiry is absent in strict liability regimes. Therefore, verdicts reached through fault-based liability regimes can convey superior information compared to verdicts reached through strict liability regimes. Further reflection reveals that this advantage is enjoyed by fault-based liability regimes only if the evidence related to the nature of defendants' actions is sufficiently informative. Otherwise, admitting such evidence can add noise to the information conveyed through verdicts. Therefore, liability regimes have a function of tuning signals conveyed on to third parties, which, in turn, causes deterrence effects by affecting the informal sanctions imposed on defendants who are found liable. We construct a model wherein this function is formalized, and we identify the optimal liability regime and burden of proof as a function of various factors (e.g. the commonality of the harmful act, and the informativeness of the evidence).

Keywords: Informal Sanctions, Reputational Sanctions, Fault-Based Liability, Strict Liability, Burden of Proof

Suggested Citation

Fluet, Claude-Denys and Mungan, Murat C., The Signal-Tuning Function of Liability Regimes (August 28, 2017). George Mason Law & Economics Research Paper No. 17-37. Available at SSRN: https://ssrn.com/abstract=3028318 or http://dx.doi.org/10.2139/ssrn.3028318

Claude-Denys Fluet

Université Laval ( email )

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada
1-418-656-2131, ext 3290 (Phone)

Murat C. Mungan (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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