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Innovation in Risky Industries under Liability Law: The Case of Double-Impact Innovations

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  • Julien Jacob

Abstract

Civil liability is widely recognized as providing incentives to control risks. We study civil liability as a means to also provide incentives to design safer technologies in risky industries. We compare two liability rules (strict liability and negligence) in situations in which double-impact innovations can be designed, i.e., when R&D has an impact both on the cost of care and on the level of risk. The two rules do not provide the same incentives. The way in which the regulator defines the standard of due care has an impact on the efficiency of the negligence rule, but this rule remains dominated by strict liability, especially when R&D mainly has an impact on the level of risk.

Suggested Citation

  • Julien Jacob, 2015. "Innovation in Risky Industries under Liability Law: The Case of Double-Impact Innovations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(3), pages 385-404, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201509)171:3_385:iiriul_2.0.tx_2-g
    DOI: 10.1628/093245613X14285667557397
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    References listed on IDEAS

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    Cited by:

    1. Michael Finus & Bianca Rundshagen, 2015. "Game Theory and Environmental and Resource Economics–In Honour of Alfred Endres," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 657-664, December.
    2. Alfred Endres & Tim Friehe & Bianca Rundshagen, 2015. "Environmental liability law and R&D subsidies: results on the screening of firms and the use of uniform policy," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(4), pages 521-541, October.

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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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