Civil Liability, Knight’s Uncertainty and Non-Dictatorial Regulator

Gerard Mondello

No 2015-47, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: This paper reviews the foundations of the unilateral standard accident model under Knightian uncertainty. It extends the Teitelbaum (2007)’s seminal article (who introduces radical uncertainty) by expanding it from producers to victims and from the probability distribution of accidents to the scale of damage. Mainly, it also considers a regulator who aggregates the agents’ preferences (Neghisi (1960) type). Under the condition that the troublemakers’ resources are sufficient to cover the damage, the article shows that uncertainty does not preclude, first, the determination of a socially optimal level of care, and second, whatever the civil liability regime (strict liability or negligence) it shows that they determine the same level of socially first-best care. The solution is inefficient only when the polluter’s wealth is insufficient to repair the victim’s losses.

Keywords: unilateral accident; tort law; safety; large risks; ambiguity; pessimism and optimism; strict liability; negligence; ultra-hazardous activities (search for similar items in EconPapers)
JEL-codes: D62 K13 K23 K32 Q52 Q58 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2015-12
New Economics Papers: this item is included in nep-hpe, nep-law and nep-mic
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http://195.220.190.85/GREDEG-WP-2015-47.pdf First version, 2015 (application/pdf)

Related works:
Working Paper: Civil Liability, Knight’s Uncertainty and Non-Dictatorial Regulator (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2015-47

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