This paper shows that polluters who underestimate environmental harm might invest excessively in promoting technological change in pollution control under environmental liability law. Neither strict liability nor negligence can prevent such a distortion. However, we define a second best due care standard under negligence that induces a welfare superior R&D equilibrium. If, on the other hand, po...

This paper modifies the standard tort model by introducing role-type uncertainty, that is, it is assumed that neither party knows in advance whether she will become the victim or the injurer when an accident occurs. When the standards of care of the two parties are assumed to be set at the socially optimal levels, only pure comparative negligence and the equal division rule guarantee efficiency...

A well known result in the economics of tort law is that in the case of a unilateral stochastic externality both a negligence rule and strict liability are in general able to achieve socially optimal precaution. It will be shown in this paper that this equivalence result does no longer hold if imperfect information and multidimensional pollution control activities are considered. It will turn o...