The Uneasy Case for Comparative Negligence

Abstract

This paper questions, and in some contexts disproves, the validity of the efficiency justification for the comparative negligence rule - the liability regime that divides the loss between the injurer and the victim. First, it has been argued that in the presence of evidentiary uncertainty, comparative negligence is generally superior. The analysis shows that this argument is theoretically questionable. It traces the analytical flaw in this claim, and conducts numerical simulations - a form of synthetic "empirical" tests - which prove the potential superiority of other rules. The second argument in favor of the comparative negligence rule is based on its alleged superior ability to deal with asymmetric information. This paper develops a general approach to liability rules as mechanisms that harness the parties' private information - by inducing self-selection. It then shows that the argument in the literature in favor of comparative negligence, that it induces self-selection, should be interpreted as a specific example of the general approach. Moreover, using this approach, we develop two new models of liability under asymmetric information, which demonstrate how negligence-type liability rules, other than comparative negligence, can induce self-selection. These conclusions weaken the efficiency basis for current proposals to expand the reach of the "division-of-liability" principle within tort law and beyond.

Keywords: Comparative Negligence, Evidentiary Uncertainty, Asymmetric Information

JEL Classification: K13