This paper shows that the provision of consumer rights can decrease welfare when some consumers remain ignorant of these rights. We find that consumers uninformed about a mandated warranty demand excessively safe products in some circumstances. In other circumstances, uninformed consumers buy...

This paper analyzes the principal-agent relationship between a plaintiff and his or her lawyer when the lawyer's investment in discovery is private information. The plaintiff uses the level of the contingency fee and potentially also restrictions on settlements to guide the lawyer's...

This paper explores the relationship between the intensity of competition in product markets and firms' incentives to lower their production costs by illegal means. Our framework combines a Salop circle with a crime model la Becker, allowing us to differentiate between several measures for the...

We investigate how third-party punishers and potential violators decide under evidentiary uncertainty in a take game. In line with the legal requirement and in contrast to economic models, neither the sanction nor the harm level affects the punishment probability, but the quality of evidence...

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...

We consider a situation of duopolistic competition in which one firm may (falsely) advertise high product quality. Consumers are heterogeneous. One group forms rational beliefs about quality, whereas some consumers are naive and fully trust any advertisement. We compare two scenarios in which...

In this paper, we examine the link between innovative activity on the part of firms, the competitive pressure to introduce innovations and optimal damages awards. While innovative activity brings forth valuable new products for consumers, competitive pressure in the ensuing innovation race...

This paper establishes that tort damages multipliers higher than one can be an instrument to induce imperfectly competitive producers to invest in product safety at socially optimal levels. In their selection of product safety levels, producers seek to maximize profits, neglecting the fact that...

This paper analyzes whether the behavior of potential offenders can be guided by information on the actual detection probability transmitted by the policy maker. It is established that, when viewed as a cheap-talk game, the existence of equilibria with information transmission depends on the...