From Volume 86, Number 6 (September 2013)
Looking to curb potential liability and comply with regulatory standards, many large-scale injurers offer nearby residents to purchase their property and help them relocate to safer areas. Because the relocation of potential victims reduces the risk of harm and saves litigation costs, buyouts have been viewed favorably by commentators and have been supported by state and government agencies. In contrast to this favorable perception of buyouts, this Article shows that buyouts may be used by injurers to exploit victims and reduce social welfare. When injurers’ activities are subject to cost-benefit standards, buying out potential victims may enable injurers to avoid taking socially desirable precautions. We show that injurers could increase their profits—and further reduce social welfare—by adopting a divide-and-conquer strategy and by fostering competition among victims. The Article concludes by considering ways for identifying and preventing exploitative buyouts.