The scope of mutual dependence in a repeated tort model

International Review of Law and Economics

Volumn 17, Issue 3, 1997, Pages 301-307

  Winter, Harold ^a  

^a NONE

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EID: 0031232071     PISSN: 01448188     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0144-8188(97)00024-0     Document Type: Article

References (16)

1. 1 For an economic analysis of the efficiency of these liability rules, see W.M. Landes and R.A. Posner, The Economic Structure of Tort Law (Cambridge, MA: Harvard University Press, 1987), or S. Shavell, Economic Analysis of Accident Law, (Cambridge, MA: Harvard University Press, 1987).
2. 1 For an economic analysis of the efficiency of these liability rules, see W.M. Landes and R.A. Posner, The Economic Structure of Tort Law (Cambridge, MA: Harvard University Press, 1987), or S. Shavell, Economic Analysis of Accident Law, (Cambridge, MA: Harvard University Press, 1987).
3. 2 When due care is positive for the injurer and zero for the victim, all the rules are efficient. See Landes and Posner, supra note 1, Ch. 3.
4. 3 When due care is positive for both the injurer and the victim, the care-based rules are efficient, but strict liability is not. See Landes and Posner, supra note 1, Ch, 3. Also, in a sequential tort setting in which the victim acts first and the injurer acts second after observing the victim's care level, only the contributory negligence rules are efficient. See S. Shavell, "Torts in Which Victim and Injurer Act Sequentially," 26 Journal of Law and Economics 589 (1983).
5. 4 In a sequential tort setting in which the victim acts first and the injurer acts second without observing the victim's care level, none of the liability rules are efficient, but strict liability plus contributory negligence dominates negligence plus contributory negligence. See H. Winter, "Sequential Torts with Imperfect Information," 14 In.ernational Review of Law and Economics 35 (1994).
6. 5 It is not necessary to use an infinitely repeated tort model. Similar results can be obtained if the game is finitely repeated, but in each period the individuals place a positive probability on there being another period of interaction.
7. 6 This is not to be confused with previous bilateral-risk models in which each individual is both a potential injurer and a potential victim in a single period. In these models, each individual may be simultaneously liable to another individual and make a claim against another individual. The current model differs from these models in two important ways: The previous models involve only a single period and, therefore, allow for no repeated interaction; and, in the current model, in any single period each individual is either an injurer or a victim, but never both simultaneously. See J. Arlen, "Re-Examining Liability Rules When Injurers as Well as Victims Suffer Losses," 10 International Review of Law and Economics 233 (1990), and "Liability for Physical Injury when Injurers as Well as Victims Suffer Losses," 8 Journal of Law, Economics, and Organization 411 (1992). Also, see Landes and Posner, supra note 1, pp. 77-79. Also, in a single-period setting, Richard Hasen discusses a rescue model in which individuals think of themselves as facing the possibility of being potential rescuers or potential victims. See R.L. Hasen, "The Efficient Duty to Rescue," 15 International Review of Law and Economics 141 (1995).
8. 6 This is not to be confused with previous bilateral-risk models in which each individual is both a potential injurer and a potential victim in a single period. In these models, each individual may be simultaneously liable to another individual and make a claim against another individual. The current model differs from these models in two important ways: The previous models involve only a single period and, therefore, allow for no repeated interaction; and, in the current model, in any single period each individual is either an injurer or a victim, but never both simultaneously. See J. Arlen, "Re-Examining Liability Rules When Injurers as Well as Victims Suffer Losses," 10 International Review of Law and Economics 233 (1990), and "Liability for Physical Injury when Injurers as Well as Victims Suffer Losses," 8 Journal of Law, Economics, and Organization 411 (1992). Also, see Landes and Posner, supra note 1, pp. 77-79. Also, in a single-period setting, Richard Hasen discusses a rescue model in which individuals think of themselves as facing the possibility of being potential rescuers or potential victims. See R.L. Hasen, "The Efficient Duty to Rescue," 15 International Review of Law and Economics 141 (1995).
9. 6 This is not to be confused with previous bilateral-risk models in which each individual is both a potential injurer and a potential victim in a single period. In these models, each individual may be simultaneously liable to another individual and make a claim against another individual. The current model differs from these models in two important ways: The previous models involve only a single period and, therefore, allow for no repeated interaction; and, in the current model, in any single period each individual is either an injurer or a victim, but never both simultaneously. See J. Arlen, "Re-Examining Liability Rules When Injurers as Well as Victims Suffer Losses," 10 International Review of Law and Economics 233 (1990), and "Liability for Physical Injury when Injurers as Well as Victims Suffer Losses," 8 Journal of Law, Economics, and Organization 411 (1992). Also, see Landes and Posner, supra note 1, pp. 77-79. Also, in a single-period setting, Richard Hasen discusses a rescue model in which individuals think of themselves as facing the possibility of being potential rescuers or potential victims. See R.L. Hasen, "The Efficient Duty to Rescue," 15 International Review of Law and Economics 141 (1995).
10. 7 It is assumed that 0 < α < 1.
11. 8 Because this is a repeated game, each individual's strategy is a complete plan of action for every possible period, given every possible past history.
12. 9 Because there are many potential victim and injurers, the probability that a particular injurer is involved in an accident does not have to equal the probability that a particular victim is involved in an accident. In this setting and under a rule of strict liability, there is no need to formally introduce the probability that a victim is in an accident.
13. 10 For a discussion of this dynamic programming technique, see David Kreps, A Course in Microeconomic Theory (Princeton, NJ: Princeton University Press, 1990), especially Appendix 2, pp. 801-813.
14. 11 The present value of a constant payoff k in each of an infinite number of periods is k/ ( 1-δ). If the payoff stream begins in the second period, the present value is kδ/(1-δ).
15. 12 One of the referees has suggested two common-law settings in which a no-liability rule has been used. First, the common law barred suits between family members. Second, the common law barred an employee from suing an employer for injuries caused by another employee (the fellow-servant rule). If the employee in the role of the injurer lacked the ability to pay damages, in effect a rule of no liability was in place. Both the family and workplace examples provide possible settings for repeated interaction between a small group of people. Even with a rule of no liability, mutual dependence in these settings may play a role in providing incentives for individuals to behave efficiently.
16. 13 This point is made by Green and Porter with respect to a model of oligopoly collusion. See E. Green and R. Porter, "Non-Cooperative Collusion Under Imperfect Price Information," 52 Econometrica 975 (1984).