Liability Rules under Evidentiary Uncertainty

Abstract

I consider the efficiency of liability rules when courts obtain imperfect information about precautionary behavior. I ask what tort rules are consistent with socially efficient precautions, what informational requirements the evidence about the parties' behavior must satisfy, what decision rules courts should apply when faced with imperfectly informative evidence, whether these decision rules can be formulated in terms of the legal concept of standard of proof, and whether some general characterization of the efficient standard can be given. I show that court judgments provide appropriate incentives to exert care if they signal that the party prevailing at trial most likely exerted due care, neither more nor less.