Liability Transfers: An Economic Assessment of Buyer and Lender Liability |
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Institution: | 1. Department of Emergency Medicine, Mayo Clinic, Rochester, MN, USA;2. Mayo Clinic Alix School of Medicine, Mayo Clinic, Rochester, MN, USA;3. Department of Health Sciences Research, Mayo Clinic, Rochester, MN, USA |
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Abstract: | This paper examines the conditions under which it is efficient to transfer liability for contamination of a given piece of property from the seller to the buyer at the time of sale and then, for debt-financed sales for which there is a foreclosure, subsequently to the lender who has financed the purchase. We identify two key potential sources of inefficiency, which depend on the relative probabilities that the parties will be judgment-proof at the time liability is imposed. The results suggest that the efficiency effects of liability transfers will depend on the relative magnitudes of these two sources of inefficiency. |
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