A Note on Selection Effects of the Hand Rule

11 Pages Posted: 10 Sep 2013

See all articles by Florian Baumann

Florian Baumann

University of Tuebingen - Faculty of Economics and Business Administration

Tim Friehe

University of Konstanz - Department of Economics

Date Written: October 2013

Abstract

The famous Hand rule weighs the burden of precaution against the reduction in expected harm. The burden may be type‐specific, implying different standards of care for different injurer types. We show that this fact may be exploited by principals in their search for minimized individual costs. Principals may hire agents with high cost of care‐taking although other agents are available. This is shown in a unilateral‐care setting either with perfect or with asymmetric information. We therefore highlight a neglected downside of the negligence rule.

Keywords: Hand rule, negligences, principal‐agent

JEL Classification: K13

Suggested Citation

Baumann, Florian and Friehe, Tim, A Note on Selection Effects of the Hand Rule (October 2013). Bulletin of Economic Research, Vol. 65, Issue 4, pp. 343-353, 2013, Available at SSRN: https://ssrn.com/abstract=2323078 or http://dx.doi.org/10.1111/j.1467-8586.2011.00402.x

Florian Baumann (Contact Author)

University of Tuebingen - Faculty of Economics and Business Administration ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

Tim Friehe

University of Konstanz - Department of Economics ( email )

Konstanz, D-78457
Germany

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