A simple model of efficient tort liability rules

Abstract

We present a simple model of tort liability in which precaution is a binary choice, and, if any party takes precaution, the probability of accidents is zero. We compare and contrast our model to other models in which precaution is a continuous variable. Our paper provides easy characterizations of the efficiency properties of a number of real and hypothetical liability rules, including no liability, Learned Hand negligence, negligence with contributory negligence as a defense, Calabresi and Hirschoff’s reverse Hand, Galena, Brown’s relative negligence, strict liability, and others. In a mathematical appendix we extend the model and derive efficiency propositions for dichotomous-action, multidefendant liability rules of various types: simple (in which one party pays 100% of accident costs); comparative negligence (in which accident costs may be spread among two or more parties); and punitive damages (in which some parties may pay more than 100% of accident costs).