Friehe Precaution Incentives in Accident Settings
2008
ISBN: 978-3-8349-8127-1
Verlag: Betriebswirtschaftlicher Verlag Gabler
Format: PDF
Kopierschutz: 1 - PDF Watermark
E-Book, Englisch, 189 Seiten, eBook
Reihe: Ökonomische Analyse des Rechts
ISBN: 978-3-8349-8127-1
Verlag: Betriebswirtschaftlicher Verlag Gabler
Format: PDF
Kopierschutz: 1 - PDF Watermark
Tim Friehe analyzes important aspects for the design of tort law which intends to induce optimal individual choices and possible limitations of workable tort law in varied settings. He highlights the consequences of the consideration of hitherto neglected behavioral dimensions for the conclusions of the economic analysis of tort law.
Dr. Tim Friehe ist wissenschaftlicher Mitarbeiter von Prof. Dr. Laszlo Goerke in der Abteilung für Volkswirtschaftslehre, insbesondere Finanzwissenschaft der Universität Tübingen.
Zielgruppe
Research
Weitere Infos & Material
1;Foreword;6
2;Acknowledgments;9
3;Table of Contents;10
4;Chapter 1 Introduction;14
4.1;1.1 General Introduction;14
4.2;1.2 Contribution;15
4.3;References;18
5;Chapter 2 The Economics of Tort Law: Basics and Selected Core Themes;20
5.1;1 Introduction;20
5.2;2 Basic Economics of Tort Law;22
5.3;3 Extensions to the Basic Model;28
5.3.1;3.1 Heterogeneity;30
5.3.2;3.2 Uncertainty;40
5.3.3;3.3 Administrative Costs;46
5.3.4;3.4 Risk Aversion;51
5.3.5;3.5 Judgment-Proofness;56
5.3.6;3.6 Bilateral Harm;62
5.4;References;65
6;Chapter 3 On the Incentive E.ects of Damage Averaging in Tort Law;77
6.1;1 Introduction;78
6.2;2 The Model and Analysis;79
6.2.1;2.1 The Model;79
6.2.2;2.2 Analysis;79
6.2.3;2.3 Discussion;83
6.3;3 Conclusion;86
6.4;References;87
7;Chapter 4 On the Superiority of Damage Averaging in the Case of Strict Liability;88
7.1;1 Introduction;89
7.2;2 The Model;90
7.3;3 The Analysis;92
7.4;4 Conclusion;94
7.5;References;95
8;Chapter 5 Screening Accident Victims;96
8.1;1 Introduction;97
8.1.1;1.1 Motivation and Main Results;97
8.1.2;1.2 Relation to the Literature;100
8.2;2 The Model, Benchmark, and Common Court Practice;101
8.2.1;2.1 The Model;101
8.2.2;2.2 The Benchmark;103
8.2.3;2.3 The Common Court Practice;104
8.3;3 Screening of Victims;106
8.4;4 Screening Victims with Variable Activity;115
8.5;5 Conclusion;118
8.6;Appendices;119
8.7;References;127
9;Chapter 6 A Note on Judgment Proofness and Risk Aversion;130
9.1;1 Introduction;131
9.1.1;1.1 Motivation and Main Results;131
9.1.2;1.2 Relation to the Literature;132
9.2;2 Model and Analysis;133
9.2.1;2.1 Non-Monetary Care;134
9.2.2;2.2 Monetary Care;137
9.3;3 Conclusion;141
9.4;4 References;142
10;Chapter 7 On the Similarity of Bilateral Harm and Unilateral Harm with Role-Type Uncertainty;144
10.1;1 Introduction;145
10.2;2 The Model;147
10.3;3 Bilateral Harm and Unilateral Harm with Role- Type Uncertainty Compared;150
10.4;4 The Special Case of Dharmapala and Ho.man;153
10.5;5 Role-Type Uncertainty Can Enable E.ciency;154
10.5.1;5.1 Equilibrium in E.cient Care;155
10.5.2;5.2 No Care Equilibrium at Ine.cient Care Levels;157
10.5.3;5.3 Discussion;162
10.5.4;5.4 An Example;163
10.5.5;5.5 Role-Type Uncertainty and other Liability Rules;165
10.6;6 Conclusion;167
10.7;Appendices;169
10.7.1;Appendix A;169
10.7.2;Appendix B;173
10.7.3;References;176
11;Chapter 8 On Avoidance Activities After Accidents;178
11.1;1 Introduction;179
11.2;2 The Model;181
11.3;3 The Analysis;182
11.3.1;3.1 Strict Liability versus Negligence;182
11.3.2;3.2 Uncertain Due Care Standard;184
11.3.3;3.3 Second-Best Considerations on Negligence;187
11.3.4;3.4 Avoidance and Punitive Damages;190
11.4;4 Conclusion;194
11.5;References;195
12;Chapter 9 Conclusion;197
The Economics of Tort Law:Basics and Selected Core Themes.- On the Incentive Effects of Damage Averaging in Tort Law.- On the Superiority of Damage Averaging in the Case of Strict Liability.- Screening Accident Victims.- A Note on Judgment Proofness and Risk Aversion.- On the Similarity of Bilateral Harm and Unilateral Harm with Role-Type Uncertainty.- On Avoidance Activities After Accidents.- Conclusion.
Chapter 5 Screening Accident Victims (S. 83-84)
1 Introduction
1.1 Motivation and Main Results
Administrative costs of the tort system are a considerable burden on society. Shavell (2004: 281) concludes for the United States that, on average, every dollar received by a victim creates a dollar or more in administrative costs. The literature on administrative costs has hitherto been concerned with, e.g., the divergence of the private and social motive to bring suit or the relative desirability of cost-shifting rules (see Spier forthcoming).
We turn to administrative costs that arise due to the assessment of damages and their e.ciency justi.cation. For instance, Shavell (2004: 237) asserts that compensation of the actual level of harm is the starting principle in most legal systems. Consequently, courts and/or litigants usually put forth considerable resources to establish the magnitude of actual damages.1 This paper is concerned with heterogeneous harm levels, bilateral care, and administrative costs associated with the veri.cation of harm levels in court.2 It is often the case that victims have a pretty good picture of the harm su.ered after an accident has occurred, whereas courts and injurers are notably less well informed. It might then be expected that victims use this information asymmetry to their advantage by misrepresenting the harm magnitude.
For instance, Kaplow and Shavell (1996) state that the primary objective of the plainti. is usually to collect as much as possible in litigation. Hence, resources spent on the accurate veri.cation appear justi.ed to correct for this tendency. The framework we consider distinguishes victim types by their harm magnitude and assumes that the court cannot tell the victim type without spending on administrative costs. The importance of uncertainty over harm is, for instance, evidenced by the ability of judges to bifurcate trials into one on liability and one on damages (see, e.g., Cooter and Ulen 2004: 428).
Our informational structure brings to the fore the role played by administrative costs in determining the harm magnitude. Take the instance of damages for loss of earnings, which is an essential element of tort liability. In establishing the present value of lost future income, a court will typically undertake the following steps: "
(1) wages are forecasted based upon an assumed growth rate, (2) if the injured victim is still employable, wages from an alternative occupation should be subtracted, but if the victim is deceased, amounts attributable to foregone personal consumption should be subtracted, (3) income taxes are subtracted, (4) each year’s remaining amount is then multiplied by the probability that the victim would still have been working if the accident had not occurred, (5) and .nally, the residual is discounted to present value at a risk-free rate of interest" (Krauss and Levy 1996: 328).
It is obvious that small changes in the assumptions on respective aspects have a tremendous impact on the resulting damages aggregate and may be highly disputed. Furthermore, note that several of these aspects are highly type-speci.c. For instance, future wages are dependent on the skills the plainti. possesses as well as his ability to create new capabilities. Likewise, the probability that the plainti. would still be working is some function of - inter alia - the past employment experience.
