Advanced Search
MyIDEAS: Login to save this article or follow this journal

Secrecy and Safety

Contents:

Author Info

  • Andrew F. Daughety
  • Jennifer F. Reinganum

Abstract

We provide a model showing that the use of confidential settlement as a strategy for a firm facing tort litigation leads to lower average safety of products sold than would occur if the firm were committed to openness. A rational risk-neutral consumer's response in a market, wherein a firm engages in confidential settlements, may be to reduce demand. A firm committed to openness incurs higher liability and R&D costs, though product demand is not diminished. We identify conditions such that, if the cost of credible auditing (to verify openness) is low enough, a firm prefers to eschew confidentiality.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.aeaweb.org/articles.php?doi=10.1257/0002828054825673
Download Restriction: no

File URL: http://www.aeaweb.org/aer/data/sept05_app_daughety.pdf
Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 95 (2005)
Issue (Month): 4 (September)
Pages: 1074-1091

as in new window
Handle: RePEc:aea:aecrev:v:95:y:2005:i:4:p:1074-1091

Note: DOI: 10.1257/0002828054825673
Contact details of provider:
Email:
Web page: https://www.aeaweb.org/aer/
More information through EDIRC

Order Information:
Web: https://www.aeaweb.org/subscribe.html

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Fluet, Claude & Garella, Paolo G., 2002. "Advertising and prices as signals of quality in a regime of price rivalry," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 907-930, September.
  2. Bagwell, Kyle, 1992. "Pricing to Signal Product Line Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(1), pages 151-74, Spring.
  3. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  4. Andrew F. Daughety & Jennifer F. Reinganum, 2002. "Informational Externalities in Settlement Bargaining: Confidentiality and Correlated Culpability," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 587-604, Winter.
  5. Laurent Linnemer, 1998. "Entry Deterrence, Product Quality: Price and Advertising as Signals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(4), pages 615-645, December.
  6. Daughety, Andrew F & Reinganum, Jennifer F, 1995. "Product Safety: Liability, R&D, and Signaling," American Economic Review, American Economic Association, vol. 85(5), pages 1187-1206, December.
  7. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-61, May.
  8. Jennifer F. Reinganum & Louise L. Wilde, 1986. "Settlement, Litigation, and the Allocation of Litigation Costs," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 557-566, Winter.
  9. Yang, Bill Z., 1996. "Litigation, experimentation, and reputation," International Review of Law and Economics, Elsevier, vol. 16(4), pages 491-502, December.
  10. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-39, March.
  11. Mark N. Hertzendorf, 1993. "I'm Not a High-Quality Firm -- But I Play One on TV," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 236-247, Summer.
  12. Mark N. Hertzendorf & Per Baltzer Overgaard, 2001. "Price Competition and Advertising Signals: Signaling by Competing Senders," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(4), pages 621-662, December.
  13. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
  14. repec:fth:stanho:e-91-11 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:95:y:2005:i:4:p:1074-1091. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.