Screening in Courts: on the joint use of negligence and causation standards

E. Feess, G. Muehlheusser, Ansgar Wohlschlegel

    Research output: Contribution to journalArticlepeer-review


    In legal systems all over the world, injurers are held liable only when the probability of having caused an accident exceeds a critical threshold (causation standard) and when behaving negligently. In a complete information framework, the joint use of the two instruments is puzzling as both whether a potential injurer has taken due care and whether he meets a specific causation standard depend only on his care level. We explain this puzzle with private information about injurers’ avoidance costs, and we derive conditions under which the joint use of both instruments can induce self-selection of different cost types. With self-selection, low-cost firms take due care, whereas high-cost firms behave negligently, thereby aiming at escaping liability via the causation standard. Compared to the optimal single-instrument policy, we derive conditions under which such self-selection policies are strictly welfare-enhancing.
    Original languageEnglish
    Pages (from-to)350-375
    Number of pages26
    JournalThe Journal of Law, Economics, and Organization
    Issue number2
    Publication statusPublished - Aug 2011


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