Measuring Recovery for Non-Contractual Investment

42 Pages Posted: 17 Sep 2003

See all articles by Omri Ben-Shahar

Omri Ben-Shahar

University of Chicago Law School

Robert A. Mikos

Vanderbilt University - Law School

Date Written: June 2003

Abstract

Parties who make investments that generate externalities may sometimes recover from the beneficiaries, even in the absence of contract. Previous scholarship has shown that granting recovery, based on either the cost of the investment or the benefit it confers, can provide optimal incentives to invest. However, this article demonstrates that the law often awards recovery that is neither purely cost-based, nor purely benefit-based, and instead equals either the greater-of or lesser-of the two measures. These hybrid approaches to recovery distort incentives to invest. The article demonstrates the prevalence of these practices, and explores informational and related reasons why they emerge. It argues that they generally are ill-suited to promote rational policies.

Suggested Citation

Ben-Shahar, Omri and Mikos, Robert A., Measuring Recovery for Non-Contractual Investment (June 2003). Available at SSRN: https://ssrn.com/abstract=444140 or http://dx.doi.org/10.2139/ssrn.444140

Omri Ben-Shahar (Contact Author)

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

Robert A. Mikos

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7184 (Phone)
615-322-6631 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/faculty-detail/index.aspx?faculty_id=227

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