TitleEnvironmental Policy Based on Strict Liability: Implications of Uncertainty and Bankruptcy
AuthorsLarson B. A.
PublicationLand Economics. 1996 Feb; 72(1):33-42.
AbstractA firm-level model is developed to analyze the impacts of bankruptcy and uncertain firm wealth on incentives for safety under a strict liability rule. Future damages and wealth are uncertain, and a firm's income earning activities that possibly create damages are incorporated into the model. This analysis shows that firms do not always undertake more of a risky activity than is socially desirable. For the extremely hazardous industry case, larger firms always undertake less of a risky activity than smaller firms. For the cyclical industry case, larger firms do nor always conduct less of a risky activity than smaller firms.