Judgment proofness and the choice between monetary and nonmonetary care

Tim Friehe, Avraham Tabbach

Research output: Contribution to journalArticlepeer-review

Abstract

This paper studies a unilateral accident model in which potentially judgment-proof 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 social costs, and (iv) one second-best due-care standard may be in excess of the efficient care level. (JEL: K13)

Original languageEnglish
Pages (from-to)249-274
Number of pages26
JournalJournal of Institutional and Theoretical Economics
Volume170
Issue number2
DOIs
StatePublished - 2014

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