This paper explores the impact of product liability on vertical product differentiation when product safety is perfectly observable. In a two-stage competition, duopolistic firms are subject to strict liability and segment the market such that a low-safety product is marketed at a low price to...

This paper explores the impact of product liability on vertical product differentiation when product safety is perfectly observable. In a two-stage competition, duopolistic firms are subject to strict liability and segment the market such that a low-safety product is marketed at a low price to...

A product recall is an observable external quality failure and a source of significant potential loss to firms as well as a threat to public safety. While such failures can be a motivation for organizational learning, little is known about the extent to which recalls can be a source of learning...

We study the impact of financial leverage on severe product quality failures that result in product recalls. Using a variety of tests, including two quasi-natural experiments that result in exogenous negative cash flow shocks to firms, we find that firms with higher financial leverage or...

In an environment in which sellers can reduce the probability of defective delivery through cooperative investment, and in which enforcement of default remedies for breach of contract is imperfect, an optimal performance standard grants buyers the option to reject goods for some but not all...

This paper explores the impact of product liability on vertical product differentiation when product safety is perfectly observable. In a two-stage competition, duopolistic firms are subject to strict liability and segment the market such that a low-safety product is marketed at a low price to...

In this paper we examine the behavior of a firm that produces a product with a privately-observed safety attribute; that is, consumers cannot observe directly the product's safety. The firm may, at a cost, disclose its safety prior to sale; alternatively, if a firm does not disclose its safety...