Creating Deeper Pockets to Resolve Judgement-Proof Problems

Posted: 25 Mar 1997

See all articles by Tracy R. Lewis

Tracy R. Lewis

Duke University, Fuqua School of Business-Economics Group; National Bureau of Economic Research (NBER); Duke University - Department of Economics; Duke Innovation & Entrepreneurship Initiative

David E. M. Sappington

University of Florida - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 1996

Abstract

We propose a mechanism that can help to create deeper pockets in order to resolve judgment-proof problems. These problems arise when a producer has insufficient wealth to compensate victims for the damages that may arise from his activities. The mechanism we propose allocates production opportunities among producers according to their relative wealth levels. This mechanism can eliminate all potential losses due to widely-dispersed wealth, even when actual wealth levels are known only to producers. We also show that deep pockets are neither necessary nor sufficient for vicarious liability to enhance social welfare.

JEL Classification: K41

Suggested Citation

Lewis, Tracey R. and Sappington, David E. M., Creating Deeper Pockets to Resolve Judgement-Proof Problems (December 1996). Available at SSRN: https://ssrn.com/abstract=10367

Tracey R. Lewis (Contact Author)

Duke University, Fuqua School of Business-Economics Group ( email )

Box 90097
Durham, NC 27708-0097
United States

National Bureau of Economic Research (NBER)

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Duke University - Department of Economics ( email )

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Box 90097
Durham, NC 27708-0204
United States

Duke Innovation & Entrepreneurship Initiative ( email )

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David E. M. Sappington

University of Florida - Department of Economics ( email )

224 Matherly Hall
Gainesville, FL 32611-7140
United States
352-392-3904 (Phone)
352-336-1420 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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