Abstract
This paper defies the widely held belief concerning the unambiguous superiority of negligence in settings of judgment proofness. We analyze a set-up with bilateral harm, bilateral care, and potential judgment proofness by one party to the accident. We establish that strict liability with a defense of contributory negligence can perform better than simple negligence and negligence with a defense of contributory negligence. It is shown that the former liability rule can better establish a discontinuity in individual costs conducive to inducing efficient care than the other rules.
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Notes
For instance, Shavell (2007) states that about half of all tort litigation in the United States concerns automobile accidents.
In the case of non-monetary care, precaution under strict liability eventually becomes greater than care under negligence since individuals do not exert more than standard care under the latter liability rule.
Leong himself already hints at this fact in the conclusion. Let us illustrate this symmetry of claims with an example from German traffic law, which imposes strict liability. If there is an accident between parties X and Y, in which both parties suffer harm to the own car and both parties contributed to the coming into being of the accident, then party X (Y) has a claim against party Y (X) for compensation of the losses sustained. This follows from § 7 and § 17 Straßenverkehrsgesetz.
We use the quotation as there no longer is the injurer in the bilateral harm case. Instead, each individual is simultaneously a potential injurer and a potential victim.
Arlen (1992) is a notable exception.
This is a standard assumption, see, e.g. Ganuza and Gomez (2005).
Dharmapala and Hoffmann (2005) likewise impose assumptions to keep clear the argumentation in the bilateral-harm setting.
We do not treat comparative negligence in the analysis but comment on it in the conclusion.
It is only a choice between these two levels since, due to Assumption 2, Y will not choose to pick y > y*.
Note that H X > A − H Y follows from H > A.
Note that Assumption 1 ensures that there is no equilibrium in substandard care, and that Assumption 2 ascertains that individual Y will not choose to exert more than due care even though individual X’s care choice falls short of the standard.
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I am indebted to Florian Baumann, Laszlo Goerke, and an anonymous referee for helpful suggestions.
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Friehe, T. On judgment proofness in the case of bilateral harm. Eur J Law Econ 26, 175–185 (2008). https://doi.org/10.1007/s10657-008-9057-7
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DOI: https://doi.org/10.1007/s10657-008-9057-7