Citation

Innes R. Int. Rev. Law Econ. 1999; 19(2): 181-203.

Copyright

(Copyright © 1999, Elsevier Publishing)

DOI

10.1016/S0144-8188(99)00004-6

PMID

unavailable

Abstract

This paper studies the use of ex post liability to regulate unilateral accidents when injurers have (1) different probability distributions for accident damages and, as a result, different optimal levels of accident prevention effort, (2) private information about their damage distributions, and (3) liability that is limited to the injurer's available assets. When the asset bound on liability is in a plausible range, an optimal damage-contingent legal rule is shown to take a threshold form, assessing maximal liability when ex post damages are above a given threshold and zero liability otherwise.