Ambiguity and Accident Law

Chakravarty, Surajeet; Kelsey, David

Abstract

Environmental accidents often involve ambiguous risks, i.e. the relevant probabilities are unknown. This paper studies how liability rules are a¤ected by ambiguity. The injurer and the victim choose a level of care, which is observable, and an unobservable action. Both actions may a¤ect the size and/or likelihood of loss. We analyse the welfare implications of tort rules. First, we show that with ambiguity, negligence is likely to perform better than strict liability. Second, we propose a tort rule of negligence and punitive damages, which gives the e¢ cient levels of both care and unobserved actions.

Citation

Chakravarty, S., & Kelsey, D. (2017). Ambiguity and Accident Law. Journal of Public Economic Theory, 19(1), 97-120. https://doi.org/10.1111/jpet.12160

• Journal Article Type: Article
• Acceptance Date: Jun 5, 2015
• Online Publication Date: Mar 16, 2016
• Publication Date: 2017-02
• Deposit Date: Jun 22, 2020
• Publicly Available Date: Jun 23, 2020
• Journal: Journal of Public Econoimc Theory
• Print ISSN: 1097-3923
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 19
• Issue: 1
• Pages: 97-120
• DOI: https://doi.org/10.1111/jpet.12160
• Keywords: Tort; punitive damages; ambiguity; accident law; liability; environmental damage JEL Classi…cation: D81; K13
• Public URL: https://nottingham-repository.worktribe.com/output/4700308
• Publisher URL: https://onlinelibrary.wiley.com/doi/epdf/10.1111/jpet.12160