Sharing sequentially triggered losses: Automated conflict resolution through smart contracts

Jens Gudmundsson*, Jens Leth Hougaard, Chiu Yu Ko

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

When actions by one agent force another to deviate from their agreements with a third, "victim" turns into "injurer" in the chain's subsequent steps. Should the chain's initiator be responsible only for the direct harm they cause or also bear some of the indirect losses they trigger? Through an axiomatic approach, we characterize the class of fixed fraction rules, which strike a balance between incentives for accident prevention on the one hand and fairness in terms of how liabilities are assigned on the other. Their simple design make the rules ideal for practical implementation through smart contracts, enabling automated conflict resolution.

Original languageEnglish
JournalManagement Science
Volume70
Issue number3
Pages (from-to)1773-1786
Number of pages15
ISSN0025-1909
DOIs
Publication statusPublished - 2024

Keywords

  • sequential losses
  • fair allocation
  • smart contracts
  • cost allocation
  • FINANCIAL NETWORKS
  • SHAPLEY VALUE
  • LIABILITY
  • QUALITY
  • RESPONSIBILITY
  • RULES

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