Abstract
Strict liability and negligence are the basic rules that courts apply to affirm tort liability and award damages. Law and Economics is concerned with the efficiency of the rules and therefore compares strict liability and negligence based on the incentives they provide accident parties to minimize total accident costs. To analyze the implications of the two liability rules for economic efficiency, a distinction is made between unilateral accidents, in which only the injurer can affect the probability of accident occurrence and the magnitude of the accident losses, and bilateral accidents, in which both accident parties can affect the probability of accident occurrence and the magnitude of the losses. Provided that damages are perfectly compensatory and that the due care level is set to be equal to the optimal level of care, both rules induce optimal precaution in unilateral accident settings; however, only the rule of strict liability induces the injurer to engage in the optimal activity level. In bilateral accident settings, all rules besides the rule of simple strict liability induce both accident parties to take optimal care; however, none of the rules can simultaneously create both accident parties incentives to engage in the optimal activity level. The litigation costs per trial are higher under a negligence rule and its variations because courts have to determine if the injurer and/or the victim complied with the set level of due care. In accident contexts where a preexisting market relationship exists between the injurer and the victim, such as in the case of a defective product, a critical factor is whether consumers (victims) are aware of the risk level of the product. If they are, all liability rules create the injurer optimal precaution incentives; if they are not, only the rule of strict liability with a defense of contributory negligence creates optimal care incentives. Today, the rule of negligence is the most commonly used rule of tort liability.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsReferences
Brown JP (1973) Toward an economic theory of liability. J Legal Stud 2(2):323–349
Calabresi G (1970) The costs of accidents. A legal and economic analysis, Yale University Press, New Haven
Calfee JE, Craswell R (1984) Some effects of uncertainty on compliance with legal standards. Va Law Rev 70(5):965–1003
Cooter R, Ulen T (2011) Law and economics, 6th edn. Pearson Addison Wesley, USA
Craswell R, Calfee JE (1986) Deterrence and uncertain legal standards. J Law Econ Org 2(2):279–303
Dari-Mattiacci G, De Geest G (2005) Judgment proofness under four different precaution technologies. JITE 161(1):38–56
Haddock D, Curran C (1985) An economic theory of comparative negligence. J Legal Stud 14(1):49–72
Hand L (1947) United States v. Carroll Towing Co., 159 F. 2d 169 (2nd Cir. 1947)
Kornhauser LA, Revesz RL (1989) Sharing damages among multiple tortfeasors. Yale Law J 98(5):831–884
Landes WM, Posner RA (1980) Joint and multiple tortfeasors: an economic analysis. J Legal Stud 9(3):517–556
Landes WM, Posner RA (1987) The economic structure of tort law. Harvard University Press, Cambridge/London
Polinsky MA (2011) An introduction to law and economics, 4th edn. Wolters Kluwer, New York
Posner RA (2010) Economic analysis of law, 8th edn. Aspen Publishers, New York
Schäfer HB, Müller-Langer F (2009) Strict liability versus negligence. In: Faure M (ed) Tort law and economics. Edward Elgar, Cheltenham
Schäfer HB, Ott C (2005) Lehrbuch der ökonomischen Analyse des Zivilrechts (Textbook economic analysis of civil law), 4th edn. Springer, Berlin
Shavell S (1980) Strict liability versus negligence. J Legal Stud 9(1):1–25
Shavell S (1986) The judgment proof problem. Int Rev Law Econ 6(1):45–58
Shavell S (1987) Economic analysis of accident law. Harvard University Press, Cambridge
Shavell S (2004) Foundations of economic analysis of law. Harvard University Press, Cambridge
Further Reading
Arlen JH (1990) Re-examining liability rules when injurers as well as victims suffer losses. Int Rev Law Econ 10(3):233–239
Arlen JH (1992) Liability for physical injury when injurers as well as victims suffer losses. J Law Econ Org 8(2):411–426
Dari-Mattiacci G, Mangan B (2008) Disappearing defendants versus judgment-proof injurers. Economica 75(300):749–765
Grady M (1983) A new positive economic theory of negligence. Yale Law J 92(5):799–829
Kahan M (1989) Causation and incentives to take care under the negligence rule. J Legal Stud 18(2):427–447
Posner RA (1972) A theory of negligence. J Legal Stud 1(1):29–96
Wittman D (1981) Optimal pricing of sequential inputs: last clear chance, mitigation of damages, and related doctrines in the law. J Legal Stud 10(1):65–91
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Science+Business Media, LLC, part of Springer Nature
About this entry
Cite this entry
Karapanou, V. (2019). Strict Liability Versus Negligence. In: Marciano, A., Ramello, G.B. (eds) Encyclopedia of Law and Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7753-2_528
Download citation
DOI: https://doi.org/10.1007/978-1-4614-7753-2_528
Published:
Publisher Name: Springer, New York, NY
Print ISBN: 978-1-4614-7752-5
Online ISBN: 978-1-4614-7753-2
eBook Packages: Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences