We study the role of liability in disciplining an expert's behavior in a credence good market. The expert, who can provide two potential treatments for a consumer's problem, may misbehave in two ways: prescribing the "wrong" treatment given his private information, or failing to exert proper...

We study the design of efficient liability in expert markets. An expert may misbehave in two ways: prescribing the "wrong" treatment for a consumer's problem, or failing to exert proper effort to diagnose the problem. We show that under a range of liabilities, the expert will choose the...

When providing professional services, an expert may misbehave by either prescribing ``wrong'' treatment for consumer's problem or failing to exert proper effort to diagnose it. We show that under a range of liabilities the expert will recommend the appropriate treatment based on his private...

Künstliche Intelligenz (KI) scheint den derzeitigen Rechtsrahmen infrage zu stellen, wenn Regeln aus einer analogen Welt auf Rechtsfragen des digitalen Zeitalters angewendet werden. Dies macht sich insbesondere dann bemerkbar, wenn KI-Systeme Schäden verursachen. Die akademische...

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. Externality and asymmetric...

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. Externality and asymmetric...

We examine the interplay of imperfect competition and incomplete information in the context of price competition among firms producing horizontally- and vertically-differentiated substitute products. We find that incomplete information about vertical quality (e.g., consumer satisfaction) that is...

This paper presents a strategic model of incentives for care and litigation under asymmetric information and self-serving bias, and studies the effects of caps on non-economic damages. We contribute to the theoretical law and economics literature by providing the first assessment of the effects...

This paper presents a strategic model of incentives for care and litigation under asymmetric information and self-serving bias, and studies the effects of damage caps. We contribute to the behavioral economics literature by generalizing the perfect Bayesian equilibrium concept to environments...

We offer a novel explanation of underwriting volatility in propertyliability insurance markets in terms of private uncertainty over public regulatory policy. Underwriting involving random losses to policyholders is one source of risk to the equity value of insurance firms. Solvency regulations,...