Judgment Proofness and the Choice between Monetary and Nonmonetary Care

Friehe, Tim; Tabbach, Avraham D.

doi:10.1628/093245614x13783876326544

JITE

2014

DOI: 10.1628/093245614x13783876326544

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Judgment Proofness and the Choice between Monetary and Nonmonetary Care

Tim Friehe¹,

Avraham D. Tabbach²

Abstract: This paper studies a unilateral accident model in which potentially judgmentproof agents (agents who may have insufficient assets to satisfy a judgment against them) choose levels of both monetary and nonmonetary care. We show that (i) monetary care may exceed its first-best level under both strict liability and negligence, (ii) social costs may be lowered by the incentive effects resulting from the monetary nature of care, (iii) an increase in the assets of potentially judgment-proof injurers may increase soc… Show more

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Cited by 3 publications

References 17 publications

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Probing the case for manufacturer liability for harms caused by judgment-proof consumers to others

Friehe,

Rössler,

Schulte

2023

Eur J Law Econ

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We study whether it is socially desirable to hold a monopolistic firm liable for the harm its potentially judgment-proof consumers inflict on third parties. Consumers’ judgment-proofness limits potential product differentiation by pooling different consumer types with uniform liability exposure. The firm’s safety choices are distorted in both regimes under consideration: consumer-only liability and residual-manufacturer liability. We find that residual-manufacturer liability dominates consumer-only liability if the monopolistic firm can observe consumers’ types, or if consumers’ types are not observable but heterogeneity stems only from their asset levels. However, if the monopolistic firm cannot observe consumers’ types and heterogeneity stems from their harm levels, it is more difficult to make a case for residual-manufacturer liability.

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Probing the case for manufacturer liability for harms caused by judgment-proof consumers to others

Friehe,

Rössler,

Schulte

2023

Eur J Law Econ

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On the political economy of public safety investments

Friehe

Langlais

2015

International Review of Law and Economics

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This paper explores the interaction of private precaution and public safety investments when the latter are determined in a political process. We distinguish the scenarios in which the median victim in ‡uences public safety from the one in which the injurer lobbies the public agent, and analyze both negligence and strict liability with a defense of contributory negligence. We establish that the levels of injurer and victim care are always socially optimal for the equilibrium level of public safety. However, the equilibrium level of public safety di¤ers from its …rst-best level and drastically depends on both the speci…cs of the political process and the liability rule applied. This entails that the level of social costs is critically determined by the choice between liability rules for a given political process.

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On the Role of Sales Taxes for Efficient Compensation of Property Loss Under Strict Liability

Baumann,

Friehe

2023

Review of Law &Amp; Economics

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When a victim loses property due to an injurer’s wrongful act, it must be decided whether the damages award should include the sales taxes associated with the lost property’s replacement. This is especially acute when the victim can make other use of the damages award than replacement. This paper compares regimes that differ in how they treat sales taxes, focusing on possible distortions of consumption and care choices. We find that regimes that include sales taxes in damages awards only when incurred to replace the lost property (as, for instance, the German Civil Code does) induce suboptimal consumption and care incentives. Distortions of care incentives also depend on the nature of care expenditures (monetary or non-monetary).

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Judgment Proofness and the Choice between Monetary and Nonmonetary Care

Cited by 3 publications

References 17 publications

Probing the case for manufacturer liability for harms caused by judgment-proof consumers to others

Probing the case for manufacturer liability for harms caused by judgment-proof consumers to others

On the political economy of public safety investments

On the Role of Sales Taxes for Efficient Compensation of Property Loss Under Strict Liability

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