The Negligence Rule
Although from the necessary and sufficient conditions for efficiency for liability rules and for incremental liability rules, when negligence is defined in terms of shortfall from the due care, it follows that both negligence rule and incremental negligence rule are efficient; in view of the importance of these rules, self-contained proofs are provided here of their efficiency. As, when negligence is defined in terms of cost-justified untaken precautions, there is no liability rule or incremental liability rule which is efficient, it follows that neither the negligence rule nor incremental negligence rule is efficient with negligence defined in terms of cost-justified untaken precautions. Impossibility results with negligence defined in terms of cost-justified untaken precautions arise because this way of defining negligence opens up possibilities for strategic manipulation. This chapter contains a detailed analysis of efficiency of negligence rule and incremental negligence rule for restricted domains of applications where such strategic manipulation is ruled out.This chapter also discusses the strategic manipulability which is inherent in the very idea of negligence. From the perspective of minimization of social costs, it is clearly desirable that those who are in a position to undertake the reduction of expected loss at a lower cost than others are the ones who should take greater care compared to those who can do so only at a higher cost. This is accomplished by having individualized negligence determination. The obverse side of this feature is that it tends to punish dexterity and reward incompetence. With individualized negligence determination, individuals may not undertake cost-justified measures to increase effectiveness of their caretaking and may expend resources for the purpose of misrepresenting their caretaking abilities.
KeywordsSocial Cost Care Level Liability Rule Strategic Consideration Unilateral Case
- Jain, Satish K. 2010b. Negligence rule: Some strategic aspects. In Economic analysis of law in India: Theory and application ed. P.G. Babu, Thomas Eger, A.V. Raja, Hans-Bernd Schafer, and T.S. Somashekar, 77–93. New Delhi: Oxford University Press.Google Scholar