TY  - JOUR
AU  - Shavell,Steven
TI  - Minimum Asset Requirements
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9335
PY  - 2002
Y2  - November 2002
UR  - http://www.nber.org/papers/w9335
L1  - http://www.nber.org/papers/w9335.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  - Requirements that parties have assets of at least a minimum level in order to participate in an activity are frequently imposed. A principal rationale for minimum asset requirements is considered in this article   potential injurers have stronger incentives to prevent harm, or not to engage in harmful activities, provided that they have at least the required level of assets at stake if they are sued for causing harm. The optimal minimum asset requirement generally reflects a tradeoff between this advantage and the disadvantage that some parties with assets below a required level ought to engage in the activity (because the benefits they would obtain exceed the expected harm they would cause).  Additionally, it is emphasized that minimum asset requirements are socially desirable only when the victims of harm are not customers of firms. When victims of harm are customers of firms, minimum asset requirements are socially undesirable.
ER  -