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Oren Bar-Gill, Quantifying Foreseeability, Symposium: Default Rules in Private and Public Law, 33 Fla. St. U. L. Rev. 619 (2006).

Abstract: This Article extends the law-and-economics literature on the foreseeability doctrine and on contract default rules more generally. It derives (numerically) the optimal default cap on contractual damages in a model with a continuum of buyer types and perfect competition among sellers. When communication costs are low, the optimal cap is significantly higher than the damages incurred by the average buyer. A better performance technology reduces the optimal damages cap. Greater homogeneity among buyers increases the optimal cap. The Ar- ticle identifies conditions under which an optimally defined foresee- ability threshold significantly increases welfare. It also explores the normative implications of the doctrinal preclusion of a zero-damages default.