When Will Judgment Proof Injurers Take Too Much Precaution?

12 Pages Posted: 11 Dec 2003

See all articles by Giuseppe Dari‐Mattiacci

Giuseppe Dari‐Mattiacci

Columbia University - Law School

Gerrit De Geest

Washington University in St. Louis - School of Law

Date Written: December 2003

Abstract

This article identifies the conditions under which potentially insolvent injurers over-invest in precaution. We show that this may happen only with respect to precautionary measures that reduce the probability of the accident. No such result occurs if precaution only reduces the magnitude of the harm. Contrary to the literature, we find that overprecaution may also occur when precaution is non-monetary. The reason is that overprecaution can be due not only to the implicit precaution-subsidy effect (the fact that care-taking reduces the injurer's exposure to liability when precaution is monetary) but also to a substitution effect between precaution that reduces the probability of accidents and precaution that reduces the magnitude of the harm. Finally, we find that when the injurer's wealth is sufficiently low, precautions may actually be lower when they are monetary than when they are non-monetary, despite the implicit precaution subsidy in the former case.

Keywords: insolvency, judgment proof problem, liability, bankruptcy, overprecaution

JEL Classification: K13, K32

Suggested Citation

Dari-Mattiacci, Giuseppe and De Geest, Gerrit, When Will Judgment Proof Injurers Take Too Much Precaution? (December 2003). International Review of Law and Economics, Vol. 26, No. 3, September 2006; George Mason Law & Economics Research Paper No. 03-56. Available at SSRN: https://ssrn.com/abstract=477042 or http://dx.doi.org/10.2139/ssrn.477042

Giuseppe Dari-Mattiacci

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

HOME PAGE: http://www.law.columbia.edu/faculty/giuseppe-dari-mattiacci

Gerrit De Geest (Contact Author)

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States
314-398-4941 (Phone)

HOME PAGE: http://www,degeest.wustl..edu

Register to save articles to
your library

Register

Paper statistics

Downloads
136
Abstract Views
2,344
rank
210,331
PlumX Metrics