Work

Liability Rules, Limited Information, and the Role of Precedent

Year: 1979

Type: article

Abstract: Recent studies of the role of law in distributing accident costs have led to the pessimistic conclusion that because judges lack the information to discover the efficient level of care, efficiency cannot be achieved by common law tort rules.We show that judges have enough information to revise the legal standard via the mechanism of precedent so that the standard adopted tends toward efficiency.This optimistic conclusion results from changing previous models so that the level of care taken by litigants affects the information available to the court, but does not directly influence the legal standard.We model a sequence of court decisions by differential equations and show that the unique, stable equilibrium is efficient.

Source: The Bell Journal of Economics

DOI: 10.2307/3003338

Authors: Robert Cooter, Lewis Kornhauser, David Lane

Institutions: National Bureau of Economic Research, Institute for Advanced Study, New York University, University of California, Berkeley

Language: English

Topic: Law, Economics, and Judicial Systems

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: green

Funder: Yale University