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European Journal of Law and Economics

, Volume 16, Issue 1, pp 39–58 | Cite as

Efficiency of 'Simple' Liability Rules When Courts Make Erroneous Estimation of the Damage

  • Ram Singh
Article

Abstract

The literature on liability rules shows that the damage awards under a liability rule affect the efficiency of the rule. One crucial factor that could affect the damage awards and therefore the efficiency characteristics of liability rules is the error made by a court while estimating the harm suffered by the victims. In this paper efficiency property of what we label as 'simple' liability rules when courts make errors in estimation of the damage is studied in a unified framework. The paper provides a characterization of efficient simple liability rules and shows that the biased court errors act to change the efficiency characterization of simple liability rules. A necessary and sufficient condition for a simple liability rule to be efficient in the presence of upper-biased court errors is provided. The analysis is carried out in a quite general framework.

court errors liability rules simple liability rules total social costs efficient liability rules negligent injurer's liability Nash equilibrium 

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Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Ram Singh
    • 1
  1. 1.Delhi School of EconomicsUniversity of DelhiDelhiIndia

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