Manufacturer Liability for Harms Caused by Consumers to Others
AbstractShould the manufacturer of a product be held legally responsible when a consumer, while using the product, harms someone else? We show that if consumers have deep pockets, then manufacturer liability is not desirable. If homogeneous consumers have limited assets, then the best rule is "residual-manufacturer liability" where the manufacturer pays the shortfall in damages not paid by the consumer. Residual-manufacturer liability distorts the market quantity when consumers' willingness to pay is correlated with their propensity to cause harm. It distorts product safety when consumers differ in their wealth levels. In both cases, consumer-only liability may be preferred.
Download InfoIf 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 95 (2005)
Issue (Month): 5 (December)
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.:
- Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
- Andrew F. Daughety & Jennifer F. Reinganum, 1994.
"Product Safety: Liability, R&D and Signaling,"
Game Theory and Information
9403007, EconWPA, revised 30 Mar 1994.
- Polinsky, A Mitchell, 1980. "Strict Liability vs. Negligence in a Market Setting," American Economic Review, American Economic Association, vol. 70(2), pages 363-67, May.
- Hamilton, Stephen F., 1998.
"Taxation, Fines, And Producer Liability Rules: Efficiency And Market Structure Implications,"
1998 Annual meeting, August 2-5, Salt Lake City, UT
20928, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Stephen F. Hamilton, 1998. "Taxation, Fines, and Producer Liability Rules: Efficiency and Market Structure Implications," Southern Economic Journal, Southern Economic Association, vol. 65(1), pages 140-150, July.
- A. Mitchell Polinsky & William P. Rogerson, 1982.
"Products Liability, Consumer Misperceptions, and Market Power,"
NBER Working Papers
0937, National Bureau of Economic Research, Inc.
- A. Mitchell Polinsky & William P. Rogerson, 1983. "Products Liability, Consumer Misperceptions, and Market Power," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 581-589, Autumn.
- Spence, A Michael, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 561-72, October.
- Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
- Doughety, Andrew F & Reinganum, Jennifer F, 1997. "Everybody Out of the Pool: Products Liability, Punitive Damages, and Competition," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(2), pages 410-32, October.
- Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
- McKean, Roland N, 1970. "Products Liability: Implications of Some Changing Property Rights," The Quarterly Journal of Economics, MIT Press, vol. 84(4), pages 611-26, November.
- John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June.
- Riley, John G, 1979.
Econometric Society, vol. 47(2), pages 331-59, March.
- Hamada, Koichi, 1976. "Liability Rules and Income Distribution in Product Liability," American Economic Review, American Economic Association, vol. 66(1), pages 228-34, March.
- Carlton, Dennis W & Loury, Glenn C, 1980. "The Limitations of Pigouvian Taxes as a Long-Run Remedy for Externalities," The Quarterly Journal of Economics, MIT Press, vol. 95(3), pages 559-66, November.
- Mattiacci, Giuseppe Dari & Parisi, Francesco, 2003. "The cost of delegated control: vicarious liability, secondary liability and mandatory insurance," International Review of Law and Economics, Elsevier, vol. 23(4), pages 453-475, December.
- Che, Yeon-Koo & Spier, Kathryn, 2006.
"Strategic Judgment Proofing,"
6100, University Library of Munich, Germany.
- Thomas J. Miceli & Rebecca Rabon & Kathleen Segerson, 2012. "Liability versus Regulation for Controlling Product-Related Risks," Working papers 2012-17, University of Connecticut, Department of Economics.
- Langinier, Corinne & Marcoul, Philippe, 2009.
"Contributory infringement rule and patents,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 70(1-2), pages 296-310, May.
- Bhole, Bharat & Wagner, Jeffrey, 2008. "The joint use of regulation and strict liability with multidimensional care and uncertain conviction," International Review of Law and Economics, Elsevier, vol. 28(2), pages 123-132, June.
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.