TY  - JOUR
AU  - Polinsky,A. Mitchell
AU  - Shavell,Steven
TI  - Optimal Cleanup and Liability After Environmentally Harmful Discharges
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4176
PY  - 1992
Y2  - September 1992
UR  - http://www.nber.org/papers/w4176
L1  - http://www.nber.org/papers/w4176.pdf
N1  - Author contact info:
A. Mitchell Polinsky
Stanford Law School
Stanford University
Stanford, CA  94305
Tel: 650/723-0886
Fax: 650/723-3557
E-Mail: polinsky@stanford.edu

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  - This article studies how liability for environmentally harmful discharges affects the incentives of firms to engage in cleanup and invest in precautions, as well as the incentives of consumers to purchase the goods whose production leads to discharges. Our main conclusion is that making firms responsible for cleanup and strictly liable for any remaining harm will lead to the socially optimal outcome. We also show that under the negligence approach -- whereby a firm is liable for damages only if it fails to take appropriate precautions or to engage in proper cleanup -- the outcome will not be optimal: too much of the good will be purchased.
ER  -