As Alicke and Govorun (The self in social judgment, Psychology Press, New York, 2005, p. 85) observed, ‘‘most people are average, but few people believe it.’’ Optimism and other forms of inflated perception of the self lead parties to exercise suboptimal precautions when undertaking risky activities and often undermine the incentive effects of tort rules. In this paper, we show that the presence of optimism undermines several critical assumptions, upon which law and economics scholars have relied when modeling the incentive effects of tort law. We construct a model representing the incentives of ‘‘optimistic’’ tortfeasors and victims, and consider mechanisms for mitigating the effects of biased decision-making. We show that in the presence of optimism, comparative negligence rules are preferable to contributory negligence rules (i.e., the traditional equivalence between contributory and comparative negligence does not hold). Further, we discover the surprising conclusion that the most effective way to correct optimism may often simply be to ‘‘forgive’’ it, shielding optimistic individuals from liability, rather than holding them liable for the harms they cause.

Optimal Liability for Optimistic Tortfeasors / Luppi, Barbara; Parisi, Francesco. - In: EUROPEAN JOURNAL OF LAW AND ECONOMICS. - ISSN 1572-9990. - 41:3(2016), pp. 559-574. [10.1007/s10657-016-9523-6]

Optimal Liability for Optimistic Tortfeasors

Barbara Luppi
;
2016

Abstract

As Alicke and Govorun (The self in social judgment, Psychology Press, New York, 2005, p. 85) observed, ‘‘most people are average, but few people believe it.’’ Optimism and other forms of inflated perception of the self lead parties to exercise suboptimal precautions when undertaking risky activities and often undermine the incentive effects of tort rules. In this paper, we show that the presence of optimism undermines several critical assumptions, upon which law and economics scholars have relied when modeling the incentive effects of tort law. We construct a model representing the incentives of ‘‘optimistic’’ tortfeasors and victims, and consider mechanisms for mitigating the effects of biased decision-making. We show that in the presence of optimism, comparative negligence rules are preferable to contributory negligence rules (i.e., the traditional equivalence between contributory and comparative negligence does not hold). Further, we discover the surprising conclusion that the most effective way to correct optimism may often simply be to ‘‘forgive’’ it, shielding optimistic individuals from liability, rather than holding them liable for the harms they cause.
2016
2-feb-2016
41
3
559
574
Optimal Liability for Optimistic Tortfeasors / Luppi, Barbara; Parisi, Francesco. - In: EUROPEAN JOURNAL OF LAW AND ECONOMICS. - ISSN 1572-9990. - 41:3(2016), pp. 559-574. [10.1007/s10657-016-9523-6]
Luppi, Barbara; Parisi, Francesco
File in questo prodotto:
File Dimensione Formato  
EJLE16_Overconfidence.pdf

Accesso riservato

Descrizione: articolo principale
Tipologia: Versione pubblicata dall'editore
Dimensione 427.25 kB
Formato Adobe PDF
427.25 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
Pubblicazioni consigliate

Licenza Creative Commons
I metadati presenti in IRIS UNIMORE sono rilasciati con licenza Creative Commons CC0 1.0 Universal, mentre i file delle pubblicazioni sono rilasciati con licenza Attribuzione 4.0 Internazionale (CC BY 4.0), salvo diversa indicazione.
In caso di violazione di copyright, contattare Supporto Iris

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/1156322
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 5
  • ???jsp.display-item.citation.isi??? 4
social impact