Review of Law & Economics
Editor-in-Chief: Parisi, Francesco / Engel, Christoph
Ed. by Cooter, Robert D. / Gómez Pomar, Fernando / Kornhauser, Lewis A. / Parchomovsky, Gideon / Franzoni, Luigi
CiteScore 2017: 0.30
SCImago Journal Rank (SJR) 2017: 0.195
Source Normalized Impact per Paper (SNIP) 2017: 0.410
Information provided by an agent affects the prices at which equity transactions take place. The agent may breach his duty either by spending too little effort at investigating relevant matters or by unduly manipulating the obtained information. As a consequence of such breach of duty, market participants may suffer from losses. Legal systems provide a rather disparate array of remedies without providing a coherent theory that would support the design of these remedies. The present paper proposes a general principle according to which courts may award expectation damages and it identifies sufficient conditions under which such damages would generate incentives for the agent to investigate with due care and to duly disclose the information.