Decoupling Liability: Optimal Incentives for Care and Litigation
(208 K)
|
NBER Working Paper No. 3634 (Also Reprint No. r1827)
Issued in December 1993
NBER Program(s): LE
A "decoupled" liability system is one in which the award to the plaintiff differs from the payment by the defendant. The optimal system of decoupling makes the defendant's payment as high as possible. Such a policy allows the award to the plaintiff to be lowered, thereby reducing the plaintiff's incentive to sue -- and hence litigation costs -- without sacrificing the defendant's incentive to exercise care. The optimal award to the plaintiff may be less than or greater than the optimal payment by the defendant. The possibility of an out-of-court settlement does not qualitatively affect these results. If the settlement can be monitored, it may be desirable to decouple it as well.
Published: Rand Journal of Economics, Vol 44, No. 4, pp. 562-570, (Winter 1991).
This paper is available as PDF (208 K) or via email.
Machine-readable bibliographic record -
MARC,
RIS,
BibTeX
|
|
|
About
Support
The research activities of the NBER are funded by grants from federal research agencies, by private foundations, and by generous donations from our corporate associates and from private individuals. The NBER is a non-profit, 501(c)(3) organization. For information on supporting the NBER, please contact:
Mr. Denis Healy, Director of Development
NBER
1050 Massachusetts Avenue
Cambridge, MA 02138-5398
ph: 617-868-3900
email: dhealy@nber.org
Close
