Dissertation Information for Manoj C. DalviNAME:
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SCHOOL: ADVISORS: COMMITTEE MEMBERS: MPACT Status: Incomplete - Not_Inspected Title: Liability rules and the acquisition of information
Abstract: "Damages stemming from a firm's activity can be viewed as a type of externality. Absent any other distortions that would make the market outcome inefficient, a regime of strict liability is efficient because it forces the firm to internalize the externality. But, on the other hand, those activities of the firm which are safe may result in a positive externality. We address whether and how the liability standard should be eased to encourage this type of activity. The liability structure can be eased in one of two ways: (i) make the firm not liable for any damages (the no liability standard) and (ii) make the firm liable if it fails to meet some standard of ""due care"" (the negligence standard). The liability rules cannot induce the ""correct"" behavior because the legal systems punish only the final outcomes; they cannot discipline the conditioning behavior of the firm. The firm conditions its decision to proceed with its activity, not proceed or search on its prior probability about the risk and on the information obtained from the search. When the prior probability is not decisive and the firm investigates, its decision to proceed with its activity is thereafter conditioned by the signal which is received from the search. It is the interaction between the penal structure, its impact on the conditioning behavior of the firm and the inability of the legal systems to discipline the conditioning behavior which enables us to understand the decisions made strict liability, no liability and negligence. As a result, search occurs under the negligence standard only for the purpose of self protection, so that it is absolved from liability if it has met the ""due care"" standard. |
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