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Getting Incentives RightImproving Torts, Contracts, and Restitution$
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Robert D. Cooter and Ariel Porat

Print publication date: 2014

Print ISBN-13: 9780691151595

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691151595.001.0001

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Prices, Sanctions, and Discontinuities

Prices, Sanctions, and Discontinuities

(p.17) 1 Prices, Sanctions, and Discontinuities
Getting Incentives Right

Robert D. Cooter

Ariel Porat

Princeton University Press

This chapter considers a misalignment between the standards of care and damages due to a court's lack of information regarding causation. It first explains the distinction between prices and sanctions before discussing the discontinuity problem in tort law and contract law. It then examines how, under negligence law, an injurer who fails to satisfy the standard of care is liable for the harm caused by his negligence and how courts impose liability on the slightly negligent injurer for all harms caused by his behavior. It also explores how discontinuity in liability under negligence law creates misalignments that may result in overdeterrence or underdeterrence. The chapter concludes by suggesting how these misalignments could be mitigated.

Keywords:   misalignment, care standards, damages, causation, prices, sanctions, discontinuity, tort law, contract law, negligence

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