No Damages Rule

True, False, or Uncertain. In contract law, a no damages rule will induce a promisee to take the efficient level of reliance, but induce a promisor to taken an inefficient level of precaution. Explain.

Impossibility Efficiency (Your opinion on my answer)

I was given a ruling on a case where a judge decided liability among two parties. A band was suing a music hall for the band's advertising expenses, because the hall burned down before the concert. The fire was no one's fault. The judge ruled that the concert hall did not owe the band money. We are just worried about efficiency not law here, and btw there were no actual numbers stated. Efficiency says that since the contract did not explicitly or implicitly allocate liability, the liability should fall on the lowest cost bearer. All we have is the 150 year old ruling, so there are really no hard facts that say one party would have had lower costs in bearing the risk (via precaution, etc.)... click for more

Tort problem

There is an attached chart. BTW the problem is talking about an amusement park, just so you know what I mean when I say "park" or "rides". The probability column wasn't needed then (I asked the professor) but it may be in one of these: 1. Under a rule of strict liability, how many inspections are likely to result? Under what circumstances will this be the efficient outcome? Now, assume we pass a law that caps damages on lawsuits so that no park has to pay out more than $100,000 to consumers injured on their rides. The judge continues to use the expected accidents loesses given in the chart to set the reasonable level of care. 2. How many safety checks would result under a negli... click for more

Precaution problem

Let w be the marginal cost of precaution, x be the level of precaution, p(x) be the probability of an accident, and A be the accident losses. *Assume unilateral precaution. True, False, or Uncertain. If the marginal cost of precaution do not rise with the level of precaution taken, the efficient level of precaution (X*) will be less than if the marginal costs of precaution increase with the level of precaution taken. What if accidents costs decrease with precaution? How does this affect the efficient level of precaution? Explain.

Marginal probability

There is a problem, where I am using the marginal Hand Rule to determine liability. When an increase in precaution will reduce liability from 10% to 4%, for example, how do you compute that? If the damages were $500,000 would it be 6% of $500,000?