We compare the performance of liability rules for managing environmental disasters when third parties are harmed and cannot always be compensated. A firm can invest in safety to reduce the likelihood of accidents. The firm’s investment is unobservable to authorities. The presence of...

Coherent-ambiguity aversion is defined within the (Klibanoff et al., Econometrica 73:1849–1892, <CitationRef CitationID="CR40">2005</CitationRef>) smooth-ambiguity model (henceforth KMM) as the combination of choice-ambiguity and value-ambiguity aversion. Five ambiguous decision tasks are analyzed theoretically, where an individual faces...</citationref>