Abstract
A lot of accidents that cause environmental pollution have happened in recent years, then the public concern with compensation problems for environmental damage, especially the case where the firm that causes the accident can't compensate all of damages, has been growing greatly. The most controversial topic in this problem at present is extending liability, and it has turned to be successful in a number of cases as a mean to find money to compensate properly victims. Therefore, to examine the role of extended liability, I consider an economic activity that involves transportation of environmentally hazardous materials like oil, and then I discuss the problem that under which conditions how extending liability of the buyer and the seller of the materials effects on social welfare, when the carrier can't compensate all of damages because of his cash (assets) constraint. Namely, the purpose of this paper is to examine the impact of extended liability on economic activity that involves environmental risk and to design optimal extended liability rule. For another, I also try to compare the efficiency between optimal rule that derived in this paper and other rule that adopted in the real world, for example with respect to oil pollution damage, under the following rules: International Convention on Civil Liability for Oil Pollution Damage (CLC), and International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (FC).
