The Signal-Tuning Function of Liability Regimes

CRREP working paper serie 2017-07

28 Pages Posted: 22 May 2018

See all articles by Claude Fluet

Claude Fluet

Université Laval

Murat C. Mungan

George Mason University - Antonin Scalia Law School, Faculty

Multiple version iconThere are 2 versions of this paper

Date Written: August 01, 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 such ciently 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 01, 2017). CRREP working paper serie 2017-07. Available at SSRN: https://ssrn.com/abstract=3175325 or http://dx.doi.org/10.2139/ssrn.3175325

Claude-Denys Fluet (Contact Author)

Université Laval ( email )

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

Murat C. Mungan

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

3301 Fairfax Drive
Arlington, VA 22201
United States

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