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judge put it, it permits defendants to adopt a “Ulysses-tied-to-the-mast arrangement that enables them to convincingly stiff opt-outs who demand

more.”

40

This has social welfare implications because it leads to

trials and litigation that would have been avoided absent the commitment

mechanism.

Finally, reduced net liability on the part of the defendant

may inefficiently reduce incentives to avoid wrongdoing.

41

Thus far, the chapter has analyzed Bayer’s strategy exclusively as a form of commitment strategy in order to understand the incentives that Bayer might have had for adopting the degree of transparency that it

required.

But viewing

reductive and

obscures

are difficult

to model

Bayer’s actions purely as an economic strategy is several attractive features of the strategy that

  • issues that are connected with transparency.

harm

First is the sense that that its product caused.

Bayer took some responsibility for the The bare existence of a schedule suggests

some acknowledgement on the part of Bayer.

In ordinary life, one does

not announce the existence of a protests one’s moral obligation

schedule to pay.

of payments while one loudly The public existence of even

a

nonpublic schedule conveys the social meaning of acknowledging some

responsibility.

This is true even though a formal apology or

acceptance of responsibility were not usually part of the settlement

____________

40 In re Vitamins Antitrust Litigation, 215 F.3d at 30(Williams, J.)(Dist. D.C. ) Similarly, another judge critical of MFN agreements argued, “Because plaintiffs are ‘straight-jacketed’ by the most favored nations agreements with certain prior settling defendants, the strong public policies favoring complete settlement … are being frustrated.” In Re Chicken Antitrust Litigation, 560 F. Supp. 943 (Dist. Ga. 1979).

41

Any liability (under either a strict liability or a negligence

regime) will provide incentives undertaking safety precautions. incentives will exist up to the

to minimize future payouts by Under a negligence regime, the point of where the defendant will

not

be

found negligent.

have incentives to marginal liability

Under a strict liability

“purchase” safety up costs equal the cost

to of

regime, the defendant will the point where the decreased the safety precautions. Under

either type of Shavell, 1987.

regime,

liability

promotes

a

level

of

deterrence.

See

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