Switching consumers and product liability: on the optimality of incomplete strict liability

This article shows that it may be socially optimal to grant accident victims less than full compensation. In our framework, firms are liable under product liability but also invest in care to prevent consumers switching to competitors. Affecting the partition of consumers by means of care-taking is not desirable from a social standpoint. Consequently, it may be optimal to reduce liability below full compensation in order to adjust firms' care incentives.

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Year of publication:	2010
Authors:	Baumann, Florian ; Friehe, Tim ; Grechenig, Kristoffel
Publisher:	Bonn : Max Planck Institute for Research on Collective Goods
Subject:	Tort law \| product liability \| care level \| asymmetric information \| switching

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Series:	Preprints of the Max Planck Institute for Research on Collective Goods ; 2010,03
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	617294038 [GVK] hdl:10419/32232 [Handle]
Classification:	K13 - Tort Law and Product Liability
Source:	EconStor

Persistent link: https://www.econbiz.de/10010266988