TY  - JOUR
AU  - Singh,Ram
TI  - On the Existence and Efficiency of Equilibria Under Liability Rules
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12625
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12625
L1  - http://www.nber.org/papers/w12625.pdf
N1  - Author contact info:
Ram Singh
NBER
1050 Massachusetts Avenue
Cambridge, MA  02138
E-Mail: singhr@nber.org
M3  - presented at "Japan Project Meeting", September 15-16, 2006
AB  - While the focus of  mainstream economic analysis of liability rules remains on  negligence liability, recently some legal scholars  have argued for the  sharing of liability. In this paper, our first objective is contribute to the debate regarding the desirability of the sharing of liability for the accident loss. To this end, we study the implications of various approaches toward liability assignment for the  existence and efficiency of equilibria. In particular, we analyze the proposal of Calabresi and Cooper (1996).  Contrary to what is suggested in the literature, we show that the sharing of liability when parties are either both negligent or both non-negligent does not threaten the existence of equilibria. Moreover, it does not dilute the incentives for the parties to take the due care. Our second objective is to extend the efficiency analysis beyond Shavell (1980, 1987) and Miceli (1997), to search for the second-best liability rules. We show that each of the standard liability rules fails to be efficient even from  a second-best perspective. Furthermore, we show that second-best efficiency requires loss sharing between non-negligent parties. As corollaries to  our main results, we reexamine some of the existing claims regarding the existence and efficiency of equilibria under liability rules.
ER  -