TY  - JOUR
AU  - Shavell,Steven
TI  - A Model of the Socially Optimal Use of Liability and Regulation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1220
PY  - 1983
Y2  - October 1983
UR  - http://www.nber.org/papers/w1220
L1  - http://www.nber.org/papers/w1220.pdf
N1  - Author contact info:
Steven Shavell
Harvard Law School
1575 Massachusetts Avenue
Hauser Hall 508
Cambridge, MA  02138
Tel: 617/495-3668
Fax: 617/496-2256
E-Mail: shavell@law.harvard.edu
AB  - Liability and safety regulation are examined as means of controlling risks in a theoretical model of the occurrence of accidents. According to the model, regulation does not result in appropriate reduction of risk -- due to the regulator's lack of knowledge about risk -- nor does liability result in that outcome -- because the incentives it creates are diluted by the chance that parties would not be sued for harm done or would not be able to pay fully for it. Thus, either liability could turn out to be superior to regulation or the reverse could be true. But as is stressed, joint use of the two means of controlling risk is generally socially advantageous, and the characteristics of their optimal joint use are determined.
ER  -