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Journal of Law, Economics, and Organization Advance Access published online on July 1, 2009
Journal of Law, Economics, and Organization, doi:10.1093/jleo/ewp014
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© The Author 2009. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Optimal Standards of Negligence When One Party Is Uninformed of the Standards

Henrik Lando*

Copenhagen Business School

* Institute of Innovation and Organizational Economics, Copenhagen Business School, Copenhagen, Denmark. Email: hl.ino{at}cbs.dk

This article analyzes optimal negligence standards when only one of two (future) parties will be informed of the standards. When the informed party is the injurer and acts first, the simple negligence rule is optimal, and under certain conditions, the first best standard of due care is optimal. The informed party will have an incentive to comply with the standard due to the discontinuity of the negligence rule, whereas the uninformed party may infer this and hence also take appropriate precautions. In general, the optimal policy for the court depends on who acts first and on who the injurer is. Thus, optimal rules are contributory negligence when the informed party is the victim and acts first, no liability when the uninformed party is the injurer and acts first, and strict liability without contributory negligence when the uninformed party is the victim and acts first. (JEL K10, K13, K14)


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