European Journal of Law and Economics

, Volume 26, Issue 2, pp 175–185 | Cite as

On judgment proofness in the case of bilateral harm

  • Tim Friehe


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.


Care incentives Judgment proofness Bilateral harm Bilateral care Tort law 

JEL Classifications

K13 H23 C72 


  1. Arlen, J. (1990). Re-examining liability rules when injurers as well as victims suffer losses. International Review of Law and Economics, 10, 233–239.CrossRefGoogle Scholar
  2. Arlen, J. (1992). Liability rules for physical injury when injurers as well as victims suffer losses. Journal of Law, Economics and Organization, 8, 411–426.Google Scholar
  3. Beard, T. R. (1990). Bankruptcy and care choice. RAND Journal of Economics, 21, 626–634.CrossRefGoogle Scholar
  4. Boyd, J., & Ingberman, D. E. (1994). Noncompensatory damages and potential insolvency. Journal of Legal Studies, 23, 895–910.CrossRefGoogle Scholar
  5. Cooter, R., & Ulen, T. (2004). Law and economics (Fourth (International Edition)). Boston: Pearson Addison Wesley.Google Scholar
  6. Dari Mattiacci, G., & De Geest, G. (2005). Judgment proofness under four different precaution technologies. Journal of Institutional and Theoretical Economics, 161, 38–56.CrossRefGoogle Scholar
  7. Dari Mattiacci, G., & De Geest, G. (2006). When will judgment proof injurers take too much precaution? International Review of Law and Economics, 26, 336–354.CrossRefGoogle Scholar
  8. Dharmapala, D., & Hoffmann, S. A. (2005). Bilateral accidents with intrinsically interdependent costs of precaution. Journal of Legal Studies, 34, 239–272.CrossRefGoogle Scholar
  9. Ganuza, J. J., & Gomez, F. (2005). Caution, children crossing: Heterogeneity of victim’s cost of care and the negligence rule. Review of Law and Economics 1: Article 3.Google Scholar
  10. Ganuza, J. J., & Gomez, F. (forthcoming). Realistic standards. Optimal negligence with limited liability. Journal of Legal Studies.Google Scholar
  11. Kahan, M. (1989). Causation and incentives to take care under the negligence rule. Journal of Legal Studies, 18, 427–447.CrossRefGoogle Scholar
  12. Leong, A. K. (1989). Liability rules when injurers as well as victims suffer losses. International Review of Law and Economics, 9, 105–111.CrossRefGoogle Scholar
  13. MacMinn, R. (2002). On the judgment proof problem. Geneva Papers on Risk and Insurance Theory, 27, 143–152.CrossRefGoogle Scholar
  14. Miceli, T. J., & Segerson, K. (2003). A note on optimal care by wealth-constrained injurers. International Review of Law and Economics, 23, 273–284.CrossRefGoogle Scholar
  15. Pitchford, R. (1995). How liable should a lender be? The case of judgment-proof firms and environmental risk. American Economic Review, 85, 1171–1186.Google Scholar
  16. Shavell, S. (1986). The judgment proof problem. International Review of Law and Economics, 6, 45–58.CrossRefGoogle Scholar
  17. Shavell, S. (1987). Economic analysis of accident law. Cambridge: Harvard University Press.Google Scholar
  18. Shavell, S. (2005). Minimum asset requirements and compulsory liability insurance as solutions to the judgment-proof problem. RAND Journal of Economics, 36, 63–77.Google Scholar
  19. Shavell, S. (2007). Liability for accidents. In A. M. Polinsky & S. Shavell (Eds.), Handbook of law and economics (vol. 1, pp. 139–182). Amsterdam: North Holland.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Department of EconomicsEberhard Karls UniversityTubingenGermany

Personalised recommendations