The paper models how different liability standards affect not only precaution levels but also the information parties voluntarily reveal before trial. Under a negligence rule, defendants over-invest in visible safety, while hiding private cost data. Under strict liability, plaintiffs under-invest in evidence gathering.
Optimal legal design isn’t about minimizing error costs. It’s about forcing information to the surface when one party holds a natural data advantage. jle.vi pdf2018
Policymakers using AI or algorithmic rules (fintech, gig economy, content moderation) should ask not “what’s fair,” but “what does this rule incentivize parties to reveal or hide?” The paper models how different liability standards affect