On Public Host Liability

Jeong-Yoo Kim

doi:10.1515/ajle-2015-0011

Article

On Public Host Liability

Jeong-Yoo Kim

Published/Copyright: October 17, 2015

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From the journal Asian Journal of Law and Economics Volume 6 Issue 2

Abstract

Civil laws or commercial laws in many countries stipulate the liability of the public host whereby a public host is liable for the losses due to damage or lost of the property of the guest left to the host. In this paper, we consider the situation in which the value of the property is ex ante not known to the host. In this case, we show that the voluntary information disclosure rule is more efficient than the mandatory information disclosure rule. We also derive some implications on Article 153 of the Korean Commercial Law prescribing for this case.

Keywords: commercial law; information disclosure; public host liability

Corresponding author: Jeong-Yoo Kim, Department of Economics, Kyung Hee University, 1 Hoegidong, Dongdaemunku, Seoul 130-701, Korea, e-mail: jyookim@khu.ac.kr

aI started to write this paper with Kyu Yub Lee at the early stage, but did not include his coauthorship at his request. I am grateful to Albert Choi and the audiences at the 4th annual conference of AsLEA held at University of Kyushu for helpful comments.

Appendix

Proof of Lemma 1: Suppose e2s>0. By Kuhn-Tucker conditions, it must be that

(7)p2(e1s, e2s)v+1=0, (7)

(8)p1(e1s, e2s)v+1≥0. (8)

Since p₁(e₁, e₂)<p₂(e₁, e₂), this is contradictory. ||

Proof of Proposition 1: Under the guest liability rule, H has no incentive to monitor at all. Thus, e₁=0. Hence, G chooses e₂ to minimize the cost borne by G

mine2GC(e2)=p(0, e2)v+e2.

On the other hand, under the host liability rule, G can be compensated for all his losses, so he will choose e₂=0. Then, H chooses e₁ to minimize the cost incurred to H

mine1HC(e1)=p(e1, 0)v+e1.

This is equivalent to the social optimum.||

Proof of Proposition 2: The social cost under mandatory disclosure rule given in (3) can be rewritten as

E[SCM(v)]=∫v˜v¯[p(e1∗(v), 0)v+e1∗(v)+c]f(v)dv+∫v_v˜[p(e1∗(v), 0)v+e1∗(v)+c]f(v)dv=E[SCV(v)]−∫v_v¯[p(0, e2∗(v))v+e2∗(v)]f(v)dv+∫v_v˜[p(e1∗(v), 0)v+e1∗(v)+c]f(v)dv,

by using (6). Since c>p(0, e2∗(v))v+e2∗ for v∈(v_, v˜), we have E[SC_M(v)]>E[SC_V(v)]. ‖

References

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Published Online: 2015-10-17

Published in Print: 2015-10-1

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Articles in the same Issue

https://doi.org/10.1515/ajle-2015-0011

Keywords for this article

commercial law; information disclosure; public host liability