Legal ignorance and optimal standards of negligence

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Legal ignorance and optimal standards of negligence

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Title: Legal ignorance and optimal standards of negligence
Author: Lando, Henrik
Abstract: How should a court set the negligence standard in a given area of activity when future (potential) injurers or victims are unlikely to know the standard set by the court? In particular, how should the standard be set in the oft-occurring case where one of the future parties is a professional actor who is likely to know the legal standard of negligence, while the other is an amateur, who is unlikely to know it? In this case, it may be optimal for the court to set the standards at the first-best level despite the amateur's ignorance of the law. The amateur may be able to infer the standards, either from the situation itself (from his knowledge of the costs and benefits of precautions), or from the act performed by the professional party. Moreover, the amateur may take due care because he realizes that the professional party will have an incentive to live up to the standard, and that the risk of a loss will therefore be on the amateur. However, when the ignorance of the amateur is "large," involving not only the legal standards but also the risks inherent in the activity, it may well be optimal for the court to depart from first best standards.
URI: http://hdl.handle.net/10398/7239
Date: 2006-12-14

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