Liability versus Regulation for Dangerous Products When Consumers Vary in Their Susceptibility to Harm and Misperceive Risk
AbstractWhen consumers vary in their susceptibility to product-related harm, safety regulation dominates liability because when consumers bear their own damages they are induced to selfselect in their purchase decisions. When consumers also misperceive risk, however, liability may be preferred because the price of the product accurately conveys the risk, thereby eliminating any distortions due to misperception. Generally, regulation is preferred when consumers accurately perceive risk, and liability is preferred when they do not. JEL Classification: K13, L51 Key words: Products liability, regulation, risk perceptions
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2012-15.
Length: 12 pages
Date of creation: Aug 2012
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Find related papers by JEL classification:
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-22 (All new papers)
- NEP-HEA-2012-09-22 (Health Economics)
- NEP-LAW-2012-09-22 (Law & Economics)
- NEP-MKT-2012-09-22 (Marketing)
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.:
- Spence, A Michael, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 561-72, October.
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