Tort Liability and Unawareness

Abstract

We explore the implications of unawareness for tort law. We study cases where injurers and victims initially are unaware that some acts can yield harmful consequences, or that some acts or harmful consequences are even possible, but later become aware. Following Karni and Vierø (2013), we model unawareness by Reverse Bayesianism. We compare the two basic liability rules of Anglo-American tort law, negligence and strict liability, and argue that negligence has an important advantage over strict liability in a world with unawareness—negligence, through the stipulation of due care standards, spreads awareness about the updated probability of harm.

Keywords: tort law, negligence, strict liability, unawareness, Reverse Bayesianism

JEL Classification: D83, K13