Everybody Out of the Pool: Products Liability, Punitive Damages, and Competition
We examine how punitive damages and competitive forces generate equilibria which reveal the safety of a product. We model the monopoly (duopoly) provision of a product whose safety is unobservable to consumers prior to purchase, but its known by the firm(s) and can be signaled via the product's price and safety claims. Consumers' likelihood of purchase is based on the price and claim combination(s) they observe, thereby reducing the incentive for mimicry of the safer product by the less safe one. Nevertheless, absent punitive damages, there is a broad portion of the parameter space wherein no revealing equilibria exist. We characterize the minimal punitive damages necessary to ensure revelation; moreover, we find that competition reduces the minimal level of punitive damages. Competition and punitive damages are complementary in that they jointly make consumer choice more effective by creating conditions under which revealing equilibria can exist. Copyright 1997 by Oxford University Press.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 13 (1997)
Issue (Month): 2 (October)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: https://academic.oup.com/jleo
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:jleorg:v:13:y:1997:i:2:p:410-32. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.