Sébastien Rouillon edited sectionThe_benchmark.tex  over 8 years ago

Commit id: 87a224a2a2d039649bf67319d24f7794e31c654a

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\label{eq:proba}  \end{equation}  \bigskip{}  Finally, we assume that lobby $I$ can be held liable for damage and that a strict liability rule prevails. In other words, if lobby $I$ sells the product and lobby $E$ bears a damage $\delta$, lobby $I$ will be asked in court to pay $\delta$ to lobby $E$. Furthermore, suppose that the maximum amount that lobby $I$ can pay is limited to $k$, which can represent either a statutory limit on damages or his level of assets.\footnote{With the latter case, the fact that lobby $I$ can pay a judgment of only $k$ reflects the implicit assumption that $b$ cannot be paid back (since otherwise, the available assets would be $b+k$). In the literature (Shavell, 1984; Shavell, 2005), this is usually justified saying that $b$ is a utility benefit. This justification does not apply here, where $b$ is a monetary benefit by definition. Here, an alternative justification would be that $b$ is distributed to the shareholders as dividends before the judgment.} Hence, assuming that $k<1$, lobby $I$ will sometimes pay $k$ instead of $\delta$, with $k<\delta$.\bigskip{}