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Products Liability When Consumers Vary In Their Susceptibility To Harm And May Misperceive Risk

Author

Listed:
  • Thomas J. Miceli
  • Kathleen Segerson
  • Suo Wang

Abstract

type="main" xml:id="coep12086-abs-0001"> This article examines products liability when consumers have private information about their susceptibilities to product-related harm. In this case, it is efficient for consumers to self-select their purchases, with those especially prone to harm refraining from purchase. Achieving this outcome requires consumers to bear their own harm, given that producers cannot observe consumer types. When consumers also misperceive risk, the problem becomes more complicated because accurate signaling of risk requires that firms bear liability. A trade-off therefore emerges between imposing liability on firms versus consumers. This article characterizes the choice among liability rules in the presence of this trade-off . ( JEL K13, L15)

Suggested Citation

  • Thomas J. Miceli & Kathleen Segerson & Suo Wang, 2015. "Products Liability When Consumers Vary In Their Susceptibility To Harm And May Misperceive Risk," Contemporary Economic Policy, Western Economic Association International, vol. 33(3), pages 468-476, July.
    • Handle: RePEc:bla:coecpo:v:33:y:2015:i:3:p:468-476
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    File URL: http://hdl.handle.net/10.1111/coep.2015.33.issue-3
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    Citations

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    Cited by:

    1. Baumann, Florian & Friehe, Tim & Rasch, Alexander, 2016. "Why product liability may lower product safety," Economics Letters, Elsevier, vol. 147(C), pages 55-58.
    2. Cosnita-Langlais, Andreea & Friehe, Tim & Langlais, Eric, 2025. "Product liability influences incentives for horizontal mergers," International Review of Law and Economics, Elsevier, vol. 84(C).
    3. Friehe Tim & Pham Cat Lam, 2025. "The Direct Incidence of Product Liability on Wages," Review of Law & Economics, De Gruyter, vol. 21(1), pages 77-90.
    4. Christoph Rössler & Tim Friehe, 2020. "Liability, morality, and image concerns in product accidents with third parties," European Journal of Law and Economics, Springer, vol. 50(2), pages 295-312, October.
    5. Friehe, Tim & Pham, Cat Lam, 2025. "Market entry and product liability," Economics Letters, Elsevier, vol. 254(C).
    6. Andrzej Baniak & Peter Grajzl, 2016. "Controlling Product Risks when Consumers Are Heterogeneously Overconfident: Producer Liability versus Minimum-Quality-Standard Regulation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(2), pages 274-304, June.
    7. Baumann, Florian & Friehe, Tim, 2021. "Products liability, consumer misperceptions, and the allocation of consumers to firms," Economics Letters, Elsevier, vol. 198(C).
    8. Tim Friehe & Christoph Rößler & Xiaoge Dong, 2020. "Liability for Third-Party Harm When Harm-Inflicting Consumers Are Present Biased," American Law and Economics Review, American Law and Economics Association, vol. 22(1), pages 75-104.
    9. Andrzej Baniak & Peter Grajzl, 2014. "Controlling Product Risks when Consumers are Heterogeneously Overconfident: Producer Liability vs. Minimum Quality Standard Regulation," CESifo Working Paper Series 5003, CESifo.
    10. Jeong-Yoo Kim, 2024. "Law and Economics of Artificial Intelligence: Optimal Liability Rules for Accident Losses Caused by Fully Autonomous Vehicles," Korean Economic Review, Korean Economic Association, vol. 40, pages 49-75.
    11. Florian Baumann & Alexander Rasch, 2024. "Product Liability and Reasonable Product Use," The Journal of Legal Studies, University of Chicago Press, vol. 53(2), pages 297-338.
    12. Tsvetanov, Tsvetan & Miceli, Thomas J. & Segerson, Kathleen, 2021. "Products liability with temptation bias," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 76-93.

    More about this item

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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