Tort law under oligopolistic competition

Gérard Mondello (1) , Evens Salies (2)

1 GREDEG - Groupe de Recherche en Droit, Economie et Gestion
2 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

This article extends the unilateral accident standard model to allow for Cournot competition. Assuming risk-neutrality for the regulator and injurers, it analyzes three liability regimes: strict liability, negligence rule, and strict liability with administrative authorization or permits systems. Under competition the equivalence between negligence rule and strict liability no longer holds, and negligence insures a better level of social care. However, enforcing both a permit system and strict liability restores equivalence between liability regimes. Furthermore, whatever the current regime, competition leads to lower the global safety level of industry. Indeed, the stronger firm may benefit from safety rents, which they may use to increase production rather than maintaining a high level of safety.

Keywords: Cournot competition; Permit system; Strict liability; Current regime; Industry

Domains: Humanities and Social Sciences; Economics and Finance

Gérard Mondello, Evens Salies. Tort law under oligopolistic competition. 2016. ⟨hal-03459225⟩