Economic analysis of liability, or liability as an incentive policy tool : Application to innovation fostering and risk regulation Julien JACOB BETA, Université.

Slides:

Advertisements

Similar presentations

Risk Analysis Fundamentals and Application Robert L. Griffin International Plant Protection Convention Food and Agriculture Organization of the UN.

Advertisements

KOOTHS | BiTS: Economic Policy and Market Regulation (winter term 2013/2014), Part 2 1 Economic Policy and Market Regulation Part 2 Dr. Stefan Kooths BiTS.

Care Robots and Liability Issues Allocating damages inflicted by (self-learning) care robots Elbert de Jong LL.M. Centre for Intellectual Property Law,

Chapter 1 Introduction. Why study Labor Markets? - Personal gain - would it be wise to train to be a blacksmith in Nebraska? What about a soybean farmer?

STRATEGIC ASSETS AND ORGANIZATIONAL RENT Amit, R., & Schoemaker, P. J. H., SMJ, 1993 Youngsoo Kim, BADM 545 Fall 2013.

Project Management Risk Management. Outline 1.Introduction 2.Definition of Risk 3.Tolerance of Risk 4.Definition of Risk Management 5.Certainty, Risk,

Better risk management in support of regulatory quality Incorporating risk assessment tools in RIA to prepare better rules Charles-Henri Montin Senior.

Chapter 1 An Introduction Different economic outcomes Using economics to explain differences Different economic outcomes Using economics to explain differences.

Pollution Policy with Imperfect Information (Ch. 8)

New Regulatory Approaches Fostering Innovation Dynamics in the Telecommunication Sector How to deal with “emerging markets” and investment incentives?

MOEA Training Course 2011 Competitiveness and regulation Charles-Henri MONTIN Senior Regulatory expert Ministry of economy and finance France French representative.

Hazards Liability and Tort Lecture 8. Outline Another economic role for the government is regulating hazards and risks Factory producing explosives (location.

STAGES OF THE POLICY PROCESS

Page 1 15th ITS World Conference September 2004 Dr. Jan Krancke T-Mobile International Who is afraid of Market Dynamics ? The Regulatory Leviathan.

1 Employment Protection Regulation and Labour Market Performance Workshop: "Measuring Law and Institutions" Conseil d’Etat - December 14 th, 2006 Comments.

Economics 100A Intermediate Microeconomics Dr. Julie Gonzalez.

Chapter 1 Introduction to Labor Economics Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Labor Economics, 4 th.

Chapter 1 Preliminaries. ©2005 Pearson Education, Inc.Chapter 12 Introduction What are the key themes of microeconomics? What is a Market? What is the.

Social Regulation By: David A. Strauss As presented by Lester M. Salamon.

1 Engineering Economic Decisions Lecture No.1 Professor C. S. Park Fundamentals of Engineering Economics Copyright © 2005.

Chapter 1: Introduction to Economic Decision Making Central Proposition: Decision Making Is At The Heart of Most Individual, Business, & Government Problems.

Benchmarking at Saudi Aramco

Game Theory “A little knowledge is a dangerous thing. So is a lot.” - Albert Einstein Topic 7 Information.

01 Limits, Alternatives, and Choices

Adviser, Ministry for State Reform, Lebanon

Cost-Benefit & Risk Analysis in Public Policy

1 CREATING A LEARNING ORGANIZATION AND AN ETHICAL ORGANIZATION STRATEGIC MANAGEMENT BUAD 4980.

Chapter Outline.

1 Hsin Chu, August 2012 Regulatory Impact Assessment Charles-Henri Montin, Senior Regulatory Expert, Ministry of economy and finance, Paris

Regulatory Approaches to Managing Investment Uncertainty Gülefşan Demirbaş ICER VWG2 Co-Chair.

How to Determine the Need to Regulate WTO TBT Committee Workshop on Good Regulatory Practice March 18 – Neil Eisner Assistant General Counsel U.S.

Chapter 1 Preliminaries. ©2005 Pearson Education, Inc.Chapter 12 Introduction What are the key themes of microeconomics? What is a Market? Why study microeconomics?

Resource-Based and Property Rights Perspectives on Value Creation: The Case of Oil Field Unitization Jongwook Kim and Joseph T. Mahoney Managerial and.

© 2013 Cengage Learning. All rights reserved.

The Precautionary Principle in the Sweden, the EU and the US Comparative Risk Regulation Workshop at University of California, Berkeley December

Nanotechnology – Within (trade) law or beyond it?

1 Economic Approaches to Regulation and its Indirect Effects A brief overview Meeting of Productivity & Regulation Group AIM London, Tuesday 4 April 2006,

CANTO 24th Annual Seminar Enhancing competitiveness in the Caribbean through the harmonization of ICT policies, legislation and regulation Bahamas, July.

The New Science of Food: Facing Up to Our Biotechnology Choices Prepared by Mark Edelman, Iowa State University David Patton, Ohio State University A Farm.

Copyright © 2014 Pearson Canada Inc. Chapter 8 AN ECONOMIC ANALYSIS OF FINANCIAL STRUCTURE Mishkin/Serletis The Economics of Money, Banking, and Financial.

US & EU Regulatory Competition in ICT Standardization Law & Policy Jane K. Winn Professor & Director Shidler Center for Law, Commerce & Technology University.

E-con. Intro to E-con Economics is the study of scarcity and choice. At its core, economics is concerned with how people make decisions and how these.

Keller and Heckman LLP Market Access and Trade Barriers and Practices: The Role of the Precautionary Principle and Other Non-Scientific Factors in Regulating.

Sessions VI and VII Conclusions and summary Francois Besnus Session Chair Cape Town July 6, 2007.

World Intellectual Property Organization DCPPS 1 presented by Mr. Vladimir Yossifov WIPO NATIONAL WORKSHOP ON INNOVATION SUPPORT SERVICES AND THEIR MANAGEMENT.

4. Regulatory Measures and Procedures 1. General measures Include regulations or administrative rules of general applicability aimed at implementing or.

Did you know? As you watch the video, make a mental note of one of the facts. How does it effect the economy? We will discuss this! Did you know?

Competing For Advantage Chapter 4 – The Internal Organization: Resources, Capabilities, and Core Competencies.

The role of international liability in the regulation of SRM field research: An economic analysis Jesse L. Reynolds – Faculty of Law,

Market power: definition and measurement Oligopoly Price and mark up, price stickiness.

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. CHAPTER 1 “Observations always involve theory.” -Edwin Hubble.

Regulatory Policy The Potential for Common Federal- Provincial-Territorial Policies on Regulation Robert Johnson Presentation for “Rules, Rules, Rules,

The new EC impact assessment: what for? EUROPEAN TRADE UNION CONFEDERATION Sophie Dupressoir.

The Impacts of Program Design on the Economics of Offsets Joe Kruger RGGI Offsets Workshop June 25, 2004.

Basic Elements of Social Regulation I. Introduction II. What markets do--and don’t do III. Benefit-cost analysis IV. Cost-effectiveness analysis V. Elements.

Rossella Bargiacchi Contact:

1 Limits, Alternatives, and Choices McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin Copyright © 2004 by the McGraw-Hill Companies, Inc. All rights reserved. Chapter 2 Objective and Risk Management.

01 Limits, Alternatives, and Choices McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Externalities Lecture 10 – academic year 2015/16 Introduction to Economics Dimitri Paolini.

Introducing Regulatory Impact Analysis into the Turkish Legal Framework “Training the Trainers” November 2008 Assessing Alternatives to Traditional.

PLAUSIBLE HYPOTHESIS OR SCIENTIFIC CERTAINTY: PROTECTING BIODIVERSITY FROM INVASIVE ALIEN SPECIES IN AN ERA OF CLIMATE CHANGE.

Risk, uncertainty and ignorance in technological design

Understand the principles of effective decision making

COMPETITION ASSESSMENT of Laws and Regulations

Benefit-Cost in Practice: Implementing the Efficiency Standard

Progress of the preparations for a White Paper on Adaptation to Climate Change Water Directors’ meeting Slovenia June 2008 Marieke van Nood, Unit.

Sustainable buildings

REGULATORY IMPACT ANALYSIS: COMPARING BENEFITS AND COSTS

Presentation transcript:

Economic analysis of liability, or liability as an incentive policy tool : Application to innovation fostering and risk regulation Julien JACOB BETA, Université de Lorraine Workshop GREAT – Université Paris-Descartes Paris, 23 avril 2013

Plan 1.Introduction 2.Application 1 : innovation fostering 3.Application 2 : risk regulation 2

Introduction Liability in economics Law and economics = “mainstream” economics Neoclassic : scientist mathematical formalization optimization perfect rationality individualism hypothetico-deductive method 3 Mathematical modeling, simplificationsisolate effects

Introduction 4 Two economic issues Ex post fairness, Justice Ex ante incentives

Introduction 5 Net earning from activity Cost of prevention Expected cost in liability Prevention ? Costly effort Reduces the probability of accident (and so, the expected damages…)

Introduction 6 whatever x

Application 1 Innovation fostering

Application 1 : innovation fostering Literature overview First studies : Endres (2006, 2008) Prevention and innovation Two components of the prevention policy 8 Innovation may be a source of : Safety-efficiency(see graph.) Cost-efficiency

Application 1 : innovation fostering 9 Innovation and prevention : case of a « safety – innovation »

Application 1 : innovation fostering 10

Application 1 : innovation fostering 11

Application 1 : innovation fostering A look at the model… 12 Operating firm : R&D firm : Social welfare : 1 operating firm (direct author)+1 R&D firm (indirect author) x*, e* Normative benchmark = maximize the social welfare, the sum of all social benefits and costs

Application 1 : innovation fostering Preliminary results : High market power is desirable for the R&D firm. In that case, no need to share liability with the innovator If the innovator has few bargaining power, sharing liability is necessary to incite to sufficient R&D Technological features have an influence on the optimal sharing rule (The way in which prevention and innovation efficiencies combine) 13

Application 1 : innovation fostering Further issues 2. Liability on the “innovator” : firm vs engineer ? On the firm : which contract to design to incite engineers to do “all diligences” ? 14

Application 1 : innovation fostering Further issues 2. Liability on the “innovator” : firm vs engineer ? On the engineer : Impact on the reservation wage ? Antagonism: prevention vs innovation Need to well define the “due diligence” Need to define the social acceptability of the risk Hampering innovation ? 15

Application 2 Risk regulation under “imprecise risk”, when innovation leads to “new and imperfectly known” risks

Application 2 : risk regulation A new issue : dealing with “imprecise” risks 17 Imprecise risk = lack of scientific knowledge controversies Innovation « new and imperfectly known » risks Ex : nanotechnologies Is the new technology more or less dangerous than the « old » one?

Application 2 : risk regulation 18 So many issues to explore!! What drives the firm’s technical choice? How to incite to precautionary behavior? Ex : research for more information before adoption? Trade-off precaution vs innovation?

Application 2 : risk regulation 19 So many issues to explore!! What drives the firm’s technical choice? How to incite to precautionary behavior? Ex : research for more information before adoption? Trade-off precaution vs innovation?

Application 2 : risk regulation 20 So many issues to explore!! Trade-off precaution vs innovation? How to decide under uncertainty? Uncertainty = no “clear” decision criterion Difficulties in cost/benefit analyses … but reversibility, flexibility are valued (options) Uncertainty = need for public participation To inform (potential costs.. and benefits!) To decide, and accept Trend : European Commission, France (nanos),…

Application 2 : risk regulation 21 So many issues to explore!! Trade-off precaution vs innovation? What about incentives to precaution under uncertainty? Liability = ex post and decentralized policy tool… BUT Negligence = need of a “hard-defined” standard Precaution : information research… Which standard? Firms are more informed… “average diligence”? Collusion? Race to the bottom? Maximal diligence? “To be in the front of the art?” Costly… hamper innovation?

Application 2 : risk regulation 22 So many issues to explore!! Trade-off precaution vs innovation? Alternative decentralized policy tools? Social responsibility? Incentive power? Stigmatization? (black listing) Monitoring… who? Which cost? Which criteria to define? Who can define?

Conclusion 23 Economic analysis of liability : “Mainstream economics” : rationality, optimization… Normative benchmark : maximizing social welfare Liability = “hard” regulatory tool (clear definitions,…) Incentives for risk prevention, and R&D in safety systems Innovator vs operator : sharing liability = new concern Risk = well known rules for decision making Uncertainty : need for new governance, new criteria Public participation to decide, and to accept