Optimal Standards of Negligence When One Party Is Uninformed of the Standards

This article analyzes optimal negligence standards when only one of two (future) parties will be informed of the standards. When the informed party is the injurer and acts first, the simple negligence rule is optimal, and under certain conditions, the first best standard of due care is optimal. The...

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Bibliographic Details
Published in:Journal of law, economics, & organization economics, & organization, 2010-12, Vol.26 (3), p.592-608
Main Author: Lando, Henrik
Format: Article
Language:English
Subjects:
Civil negligence
Comparative negligence
Contributory negligence
Courts
Due care
Financial liabilities
Injuries
Investors
Law
Legal liability
Liability
Negligence
Rule of law
Rules
Standards of care
Strict liability
Studies
Torts
Victims
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Summary:This article analyzes optimal negligence standards when only one of two (future) parties will be informed of the standards. When the informed party is the injurer and acts first, the simple negligence rule is optimal, and under certain conditions, the first best standard of due care is optimal. The informed party will have an incentive to comply with the standard due to the discontinuity of the negligence rule, whereas the uninformed party may infer this and hence also take appropriate precautions. In general, the optimal policy for the court depends on who acts first and on who the injurer is. Thus, optimal rules are contributory negligence when the informed party is the victim and acts first, no liability when the uninformed party is the injurer and acts first, and strict liability without contributory negligence when the uninformed party is the victim and acts first.
ISSN:8756-6222
1465-7341
DOI:10.1093/jleo/ewp014