| Abstract: | This article analyses the incentives generated by liability rules for non-causal damages on the basis of a cause assumption, which can be found in the German environmental liability law. In contrast to the basic model of the economic analysis of liability rules, where strict liability and the negligence rule induce the same precaution activities for risk neutral people, both rules differ in their incentives in the case of a cause assumption. It is shown that without a possibility of exculpation for intended business there will be inefficient incentives which result in an sub-optimal social income. If there exists (like in the German law) a possibility of exculpation for intended business, a tendency for reaching the optimal precaution level can be observed. Therefore from an economic point of view the use of strict liability in combination with the German version of a cause assumption leads to an efficient result. |
