Document Type
Article
Publication Date
6-13-2024
Abstract
Part of a ship's cargo is jettisoned in order to save the vessel and the remaining cargo from imminent peril. How should the loss be shared among the cargo owners? The law of general average, an ancient principle of maritime law, prescribes that the owners share the loss proportionally according to the respective values of their cargo. We analyze whether the law of general average is a truthful and efficient mechanism. That is, we investigate whether it induces truthful reporting of cargo values and yields a Pareto efficient allocation in equilibrium. We show that the law of general average is neither truthful nor efficient if owners have expected utility preferences, but is both truthful and efficient if owners have maxmin utility preferences. We discuss why maxmin behavior may be reasonable in the general average context.
Scholarly Commons Citation
Anderlini, Luca and Teitelbaum, Joshua C., "The Law of General Average" (2024). Georgetown Law Faculty Publications and Other Works. 2612.
https://scholarship.law.georgetown.edu/facpub/2612
Included in
Economic Theory Commons, Finance and Financial Management Commons, Insurance Commons, Law and Economics Commons, Law of the Sea Commons, Other Law Commons