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Applied and bridge studies study record
Hollow Win theory & mechanismsThe Calabresian Third-Party Welfare Theorem: Rule Choice, Accident Cost Allocation, and the System Welfare Gap
STATUS · Manuscript in progressSSRN · Not yet posted
MECHANISM
Identify the incentive structure and the condition that would falsify the claim.
RULE CHANGE
Read the intervention only after the paper shows how the current payoff space fails to support system welfare.
READER USE
Use the summary to see where private gain creates system exposure, then check the study record.
Contribution — what this adds to the conversation
Provides formal proof, structural decomposition, explicit switching threshold, and empirical tractability demonstrations. Connects to Missing System Theory and broader SAPM program.
WHAT'S NEW · First formal theorem closing the gap between Calabresi-Melamed typology and third-party welfare; no prior paper characterizes divergence as a general theorem across all three protection regimes.
The paper establishes the Calabresian Third-Party Welfare Theorem, showing that the optimal legal rule for injurer and victim can differ from the rule that maximizes overall welfare including third parties. It decomposes the welfare loss imposed on non-party classes by property rules, liability rules, and inalienability, and provides an explicit switching threshold. Applications to environmental torts, products liability, and FDA regulation demonstrate empirical tractability.