Product Safety: Liability, R&D, and Signaling
AbstractThe authors develop a monopoly model of product design and safety signaling incorporating a parametric liability specification. The firm first engages in R&D to affect the safety of its product. Since the outcome of R&D trials is unobservable to consumers, the firm then chooses its price, understanding that consumers may draw inferences from the price about the product's safety. Consumers acquire and use the product; injuries lead to losses which are allocated by the liability system. The authors vary the liability system's allocation of losses and trace out the implications for R&D investment and the price-safety relationship. Copyright 1995 by American Economic Association.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 85 (1995)
Issue (Month): 5 (December)
Other versions of this item:
- Andrew F. Daughety & Jennifer F. Reinganum, 1994. "Product Safety: Liability, R&D and Signaling," Game Theory and Information 9403007, EconWPA, revised 30 Mar 1994.
- Daughety, Andrew & Reinganum, Jennifer, 1992. "Product Safety: Liability, R & D and Signaling," Working Papers 94-17, University of Iowa, Department of Economics, revised 1994.
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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