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Characterization of Efficient Product Liability Rules: When Consumers are Imperfectly Informed

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Author Info
Ram Singh (Delhi School of Economics)

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Abstract

Product liability has acquired immense importance in the last 50 years. Various studies show that when consumers are imperfectly informed about the product related risk, the market mechanism will not lead to an efficient outcome and tort liability is required for economic efficiency. Many product-caused injuries are governed by liability rules. In this paper efficiency properties of the entire class of product liability rules when consumers are imperfectly informed about the product related risk are studied in a unified framework. A necessary and sufficient condition for efficiency of a product liability rule is derived. The analysis is carried out in a somewhat more general framework.

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Publisher Info
Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 110.

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Length: 41 pages
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:cde:cdewps:110

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Related research
Keywords: Product Risk; total accident costs; efficient product liability rules; social benefits; negligent consumer's liability; imperfect information; Nash equilibrium.;

Find related papers by JEL classification:
K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability

This paper has been announced in the following NEP Reports:

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.:
  1. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law & Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  2. H. Heyer, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 218-218, December. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
    Other versions:
  4. Smallwood, Dennis E & Conlisk, John, 1979. "Product Quality in Markets Where Consumers are Imperfectly Informed," The Quarterly Journal of Economics, MIT Press, vol. 93(1), pages 1-23, February. [Downloadable!] (restricted)
  5. Marino, Anthony M., 1988. "Products liability and scale effects in a long-run competitive equilibrium," International Review of Law and Economics, Elsevier, vol. 8(1), pages 97-107, June. [Downloadable!] (restricted)
  6. Beales, Howard & Craswell, Richard & Salop, Steven, 1981. "Information Remedies for Consumer Protection," American Economic Review, American Economic Association, vol. 71(2), pages 410-13, May. [Downloadable!] (restricted)
  7. R. Wiegert, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 268-268, December. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
  9. Schwartz, Alan & Wilde, Louis L, 1985. "Product Quality and Imperfect Information," Review of Economic Studies, Blackwell Publishing, vol. 52(2), pages 251-62, April. [Downloadable!] (restricted)
  10. Jones, Philip & Hudson, John, 1996. "Signalling product quality: When is price relevant?," Journal of Economic Behavior & Organization, Elsevier, vol. 30(2), pages 257-266, August. [Downloadable!] (restricted)
  11. N. Draper, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 106-106, December. [Downloadable!] (restricted)
  12. Burrows, Paul, 1992. "Consumer safety under products liability and duty to disclose," International Review of Law and Economics, Elsevier, vol. 12(4), pages 457-478, December. [Downloadable!] (restricted)
  13. R. Lasser, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 94-94, December. [Downloadable!] (restricted)
  14. R. Dutter, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 238-238, December. [Downloadable!] (restricted)
  15. Beales, Howard & Craswell, Richard & Salop, Steven C, 1981. "The Efficient Regulation of Consumer Information," Journal of Law & Economics, University of Chicago Press, vol. 24(3), pages 491-539, December.
  16. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  17. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn. [Downloadable!] (restricted)
  18. Walter Y. Oi, 1973. "The Economics of Product Safety," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 3-28, Spring. [Downloadable!] (restricted)
  19. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  20. Spence, A Michael, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 561-72, October. [Downloadable!] (restricted)
  21. Edward E. Schlee, 1996. "The Value of Information About Product Quality," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 803-815, Winter. [Downloadable!] (restricted)
  22. Viscusi, W Kip, 1991. "Product and Occupational Liability," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 71-91, Summer. [Downloadable!] (restricted)
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