Healthcare treatment can be considered a credence good; that is, the patient may not always be able to infer quality ex ante nor observe it ex post. In this article, we study the allocation of liability among two physicians for joint damage under two liability regimes: strict liability and the negligence rule. The credence characteristic implies that the patient imperfectly detects treatment error. We find that the negligence rule is more deterrent than strict liability if the probability of detection of treatment error by the patient is high. If the probability of detection is low, both liability regimes are equivalent. An efficient allocation rule should be based on the degree of substitutability between the precaution levels of the physicians and the probability that the patient detects treatment error.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.