We analyze liability rules in a setting where injurers are potentially insolvent and where negligence standards may deviate from the socially optimal level. We show that proportional liability, which sets the measure of damages equal to the harm multiplied by the probability that it was caused...

We analyze liability rules in a setting where injurers are potentially insolvent and where negligence standards may deviate from the socially optimal level. We show that proportional liability, which sets the measure of damages equal to the harm multiplied by the probability that it was caused...

This paper analyzes how income taxation affects optimal law enforcement. A key insight of the analysis is that if monetary sanctions are deductible, income taxation is equivalent to increasing offenders' wealth. This implies, for example, that income taxation reduces the social costs of crime...

Asymmetric information is widely considered to be a major obstacle to settlements. We argue that litigants facing asymmetric information can use a simple add-on to the settlement offer in order to overcome the information barriers to settlements. In particular, the informed party can promise to...

This paper studies the role of commitment in the design of enforcement mechanisms when enforcement can remedy harm from non-compliance. We consider a game between an enforcement authority ("enforcer") and an offender in which either the enforcer or the offender may act as a Stackelberg leader....

If a seller delivers a good non-conforming to contract, European and US warranty law allows consumers to choose between some money transfer and termination. Termination rights are, however, widely criticized, mainly for fear that the buyer may use non-conformity as a pretext for getting rid of a...

When investments are non-verifiable, inducing cooperative investments with simple contracts may not be as difficult as previously thought. Indeed, modeling 'expectation damages' close to legal practice, we show that the default remedy of contract law induces the first best. Yet, in order to...

We consider a model of a single defendant and N plaintiffs where the total cost of litigation is fixed on the part of the plaintiffs and shared among the members of a suing coalition. By settling and dropping out of the coalition, a plaintiff therefore creates a negative externality on the other...