The benefits of extended liability

• 成果类型: Article
• 署名作者: Hiriart, Yolande; Martimort, David
• 署名单位: Universite de Toulouse; Universite de Toulouse
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/j.1756-2171.2006.tb00031.x
• 发表日期: 2006
• 页码: 562-582
• 关键词: judgment-proof firms; environmental risk; lender; CHOICE; WEALTH

摘要

We characterize the optimal regulation of a firm that undertakes an environmentally risky activity. This firm (the agent) is protected by limited liability and bound by contract to a stakeholder (the principal). The level of safety care exerted by the agent is nonobservable. This level of care depends both on the degree of incompleteness of the regulatory contract and on the allocation of bargaining power between the principal and the agent. Increasing the wealth of the principal that can be seized upon an accident has no value when private transactions are regulated but might otherwise strictly improve welfare. An incomplete regulation supplemented by an ex post extended liability regime can sometime achieve the second best.