Should compensation be based on costs or benefits?

In restitution cases should the compensation be based on the benefit to one side or on the cost to the other side? For example, should a rescuer be compensated for the costs to the rescuer or for the benefits to the rescuee? A similar question can be asked regarding awards in nuisance and accident cases. For example, should a polluter be liable for the damage to the pollutee or for the benefit to the polluter from not having to install smoke scrubbers? In this paper we will show the critical role that asymmetries in information have on the choice of payment structure.