Legal penalties and liability insurance seem to have counteracting effects on the incentives of a potential injurer to take due care. However, if legal penalties are set efficiently and implemented perfectly, unrestricted access to insurance can be optimal. In contrast, if the standards of guilt...

We analyze optimal correlation levels in information technologies when multiple signals are available as contracting mechanisms within the principal-agent paradigm. We identify sufficient conditions ensuring that uniformly lower-correlation functions (in action levels) are preferred, as well as...