Innovation and diffusion in risky industries under liability law: the case of “double-impact” innovations
AbstractWe suggest a model of innovation and diffusion of a new technology in which two firms, one innovative and one non-innovative, undertake risky activities that are regulated by liability rules. One originality of this study is to consider the presence of a “double-impact” innovation, impacting both the cost of risk prevention and the probability of accident. We compare strict liability and negligence in terms of incentives to innovate, to adopt the new technology and to prevent the risk. We find that the type of innovation and the behavior of the Regulator play key roles: when the Regulator acts as a “leader”, a negligence rule is socially preferable if the innovation mainly impacts the cost of risk prevention. In other cases (Regulator as a “follower” and/or innovation with sufficiently high impact on the probability of accident), strict liability is preferable.
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Bibliographic InfoPaper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2011-24.
Date of creation: 2011
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Innovation; technological risk; strict liability; negligence.;
Find related papers by JEL classification:
- E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- F3 - International Economics - - International Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-18 (All new papers)
- NEP-CSE-2012-01-18 (Economics of Strategic Management)
- NEP-INO-2012-01-18 (Innovation)
- NEP-TID-2012-01-18 (Technology & Industrial Dynamics)
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