Optimal Liability for Libel

41 Pages Posted: 17 Aug 2002

See all articles by Oren Bar-Gill

Oren Bar-Gill

Harvard Law School

Assaf Hamdani

Tel Aviv University; Buchman Faculty of Law; Coller School of Management; European Corporate Governance Institute (ECGI)

Date Written: July 2002

Abstract

Courts justify the constitutional law of libel with consequential reasoning, yet they fail to arrive at an optimal liability regime. Previous literature, relying on the nature of information as a public good, concurs with the courts about the inadequacies of strict liability, but fails to devise an optimal regime. The present study aims to fill this void, and formally study optimal liability for libel taking into account the unique nature of information. We first demonstrate that a single damage measure for publication of false libelous information cannot simultaneously induce socially optimal decisions regarding both pre-publication verification and publication. We then propose a two-dimensional strict liability rule, which can induce the first-best outcome. Interestingly, the first dimension of the optimal rule, which applies when some positive level of verification is socially desirable, sets the damage award equal to the social benefit from truthful publication.

Keywords: Libel, Externalities, Liability, Tort Law, Constitutional Law

JEL Classification: D62, D80, K13, L15

Suggested Citation

Bar-Gill, Oren and Hamdani, Assaf, Optimal Liability for Libel (July 2002). Available at SSRN: https://ssrn.com/abstract=323767 or http://dx.doi.org/10.2139/ssrn.323767

Oren Bar-Gill (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Assaf Hamdani

Tel Aviv University; Buchman Faculty of Law; Coller School of Management ( email )

Ramat Aviv
Tel Aviv, 69978
Israel

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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