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

Baumann, Florian; Friehe, Tim; Grechenig, Kristoffel - 2010

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...