ECONOMIC ANALYSIS OF TORT LAW CONTRACT TORT PRINCIPAL - AGENCY BILATERAL - AGENCY Liability rule or liability marginal cost curve for Agent 1 is added in orange to the joint social surplus of the parties Max [p(a 2 )R P (a 1 ) + [1 - p(a 2 )]R NP (a 1 )] - a 1 - a 2 - [1-p(a 2 )]D e [1 - p(a 1, a 2 )] = Probability of Breach
{}