Cover of: Status and Liability
Florian Baumann, Tim Friehe, Inga Hillesheim

Status and Liability

Section: Articles
Volume 171 (2015) / Issue 2, pp. 285-307 (23)
Published 09.07.2018
DOI 10.1628/093245615X14273596659125
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  • 10.1628/093245615X14273596659125
Summary
We analyze liability law when the value of the good at risk has an influence on the consumer's social status. It is first established that standard liability rules fail to induce efficient choices. We argue that standard negligence will tend to outperform standard strict liability. Next, we suggest welfare-improving adjustments to strict liability and negligence. An optimally adjusted strict liability rule will require that damages decrease in the level of harm, and thereby ensures first-best choices. Under negligence, the second-best due-care standard should be set below the level of care that minimizes the sum of care and expected harm.