We present a dynamic model of noncontractual litigation in which the parties' decision whether to litigate depends on information produced by courts and, vice versa, the courts' involvement in the lawmaking process depends on the cases proposed by the parties. Thereby, we integrate in one model...

This paper studies markets plagued with asymmetric information on the quality of traded goods. In Akerlof's setting, sellers are better informed than buyers. In contrast, we examine cases where buyers are better informed than sellers. This creates an inverse adverse selection problem: The market...

Shavell (1980) established that tort regimes fail to incentivize optimal activity levels. The bearer of residual loss adopts a socially optimal activity level; however, the nonbearer of residual loss will adopt an excessive level. We explore alternative liability rules, which distribute the cost...

Shavell (1980) established that all existing tort regimes fail to incentivize optimal activity levels. The bearer of residual loss adopts a socially optimal activity level, however the non-bearer of residual loss will adopt an excessive level of activity. In this paper, we explore alternative...

Sharing rules have a filtering effect on violations: they prevent the most harmful violations and let the least harmful ones occur. We show the conditions under which the filtering effect improves social welfare and argue that this may explain why, in most areas of the law, sharing rules are, in...

This paper analyzes liability rules when consumers and third parties/the environment incur harm. Expected harm is convex in the level of output and modeled as a power function. We show that the social ranking of liability rules previously established for the case in which only consumers suffer...

This paper analyzes liability rules when consumers and third parties/the environment incur harm. Expected harm is convex in the level of output and modeled as a power function. We show that the social ranking of liability rules previously established for the case in which only consumers suffer...