Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/94093 
Authors: 
Year of Publication: 
2011
Series/Report no.: 
SFB/TR 15 Discussion Paper No. 364
Publisher: 
Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY), München
Abstract: 
The present paper provides an economic analysis of vicarious liability that takes information rents and monitoring costs to be borne by the principal explicitly into account. In the presence of information rents or if the principal is wealth constrained herself, vicarious liability need not generate efficient precaution incentives. Rather, precaution incentives turn out to depend on the exact quantum of damages specified by courts. I shall compare incentives under three damages regimes: strict liability, the traditional negligence rule, and proportional liability. To do so, I make use of the intensity principle that allows to rank damages regimes based on the monotonicity of differences of the principal's expected payof f as a function of induced precaution.
Subjects: 
vicarious liability
precaution incentives
judgement-proof principals and agents
discrepancy between private and social costs
JEL: 
K13
D62
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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