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Soft Regulators, Tough Judges

23 Pages Posted: 8 Mar 2005  

Gerrit De Geest

Washington University in St. Louis - School of Law

Giuseppe Dari‐Mattiacci

Amsterdam Law School; Amsterdam Business School; Tinbergen Institute

Abstract

When tort liability and regulation are jointly applicable, judges have a tendency to be more demanding than regulators. Liability standards are generally more stringent than regulatory ones: violation of a regulatory standard is normally considered negligence per se while compliance with regulation does not automatically relieve the injurer of tort liability. While under an imperfectly working tort liability system - i.e. a tort law system whose prevention function is undermined by judgment proof or disappearing defendants - injurers take too little precaution, it will still often be the case that only major violations (and not minor violations) are rewarding. Mathematically, this will occur when the injurer's expected expenses function exhibits two local minima, one at the socially optimal level of care and the other below that level. Regulation set below the optimal level can make the latter unfeasible, thereby enabling liability to induce socially optimal outcomes.

Keywords: insolvency, judgment proof problem, disappearing defendant, bankruptcy, regulation

JEL Classification: K13, K32

Suggested Citation

De Geest, Gerrit and Dari‐Mattiacci, Giuseppe, Soft Regulators, Tough Judges. Supreme Court Economic Review, Vol. 15, 2007; George Mason Law & Economics Research Paper No. 05-06. Available at SSRN: https://ssrn.com/abstract=681470 or http://dx.doi.org/10.2139/ssrn.681470

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

Giuseppe Dari-Mattiacci

Amsterdam Law School ( email )

Amsterdam, 1018 WB
Netherlands

HOME PAGE: http://www.uva.nl/en/profile/d/a/g.darimattiacci/g.darimattiacci.html

Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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