Uncertain litigation and liability insurance.

Research output: Contribution to journalArticlepeer-review

22 Scopus citations


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 contract, if the standards of guilt assessment are uncertain, the size of the legal penalties may act as a spur to litigation. Therefore, the penalties required to maintain incentives when access to insurance is unlimited may provoke too much litigation, and as a consequence, the costs of ensuring due care may decline when insurance is restricted by mandate.

Original languageEnglish (US)
Pages (from-to)218-231
Number of pages14
JournalRAND Journal of Economics
Issue number2
StatePublished - 1991
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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