Disappearing Defendants Versus Judgment-Proof Injurers

27 Pages Posted: 3 Feb 2005 Last revised: 7 Apr 2011

Giuseppe Dari‐Mattiacci

Amsterdam Law School; Amsterdam Business School; Tinbergen Institute

Barbara Mangan

Utrecht University - Utrecht University School of Economics; Compuware B.V

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Abstract

In this paper, we analyze two ways in which liability can be reduced: caps (the judgment proof problem) versus proportional reductions (the disappearing defendant problem). We show that these two problems have different incentive effects and hence yield dissimilar levels of social welfare. Moreover, when they occur simultaneously, they may have offsetting effects. We also show that the negligence rule with cause-in-fact may yield lower (rather than greater) levels of social welfare than strict liability. Finally, we analyze the optimal setting of the negligence standard. Our model encompasses different precaution technologies as well as monetary vs. non-monetary precautions.

Keywords: insolvency, judgment proof, strict liability, negligence, disappearing defendant

JEL Classification: K13, K32

Suggested Citation

Dari‐Mattiacci, Giuseppe and Mangan, Barbara, Disappearing Defendants Versus Judgment-Proof Injurers. Economica, Vol. 75, No. 300, pp. 749-765, November 2008; George Mason Law & Economics Research Paper No. 05-01. Available at SSRN: https://ssrn.com/abstract=660743 or http://dx.doi.org/10.2139/ssrn.660743

Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Barbara Mangan

Utrecht University - Utrecht University School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

Compuware B.V

Hoogoorddreef 5
Bereken Route
1101 BA Amsterdam
Netherlands

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