American Law and Economics Association Awards Prize for Market Design Research Paper
The American Law and Economics Review (ALER) has awarded ZEW economist Florian Baumann and his co-author Professor Tim Friehe from the University of Marburg the Best Theory Paper Prize 2022 for the article “Strict Liability and Negligence with Search for Precautionary Measures”. This was announced at the annual meeting of the American Law and Economics Association on 4 and 5 August at Columbia Law School (USA).
In their article, the two economists contribute to the discussion on the choice between strict liability and liability for negligence only. They were particularly interested in how actors behave when they initially have only imperfect information about precautionary options that influence the expected damage in the event of an accident in a particular activity. The researchers conclude that strict liability may impose less societal costs than negligence liability when the existence of superior precautionary measures is uncertain and actors’ search costs are high. These conditions are particularly plausible for new technologies. Instead, pure negligence liability is socially preferred when the existence of superior precautionary measures is either unlikely, or very likely but information costs are low. These constellations are likely in the case of routine activities. The prize is endowed with 2,500 dollars.