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Characterization of Efficient Product Liability Rules: When Consumers are Imperfectly Informed

  • Ram Singh

    (Delhi School of Economics)

Product liability has acquired immense importance in the last 50 years. Various studies show that when consumers are imperfectly informed about the product related risk, the market mechanism will not lead to an efficient outcome and tort liability is required for economic efficiency. Many product-caused injuries are governed by liability rules. In this paper efficiency properties of the entire class of product liability rules when consumers are imperfectly informed about the product related risk are studied in a unified framework. A necessary and sufficient condition for efficiency of a product liability rule is derived. The analysis is carried out in a somewhat more general framework.

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 110.

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Length: 41 pages
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:cde:cdewps:110
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  1. Spence, A Michael, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 561-72, October.
  2. Edward E. Schlee, 1996. "The Value of Information About Product Quality," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 803-815, Winter.
  3. H. Heyer, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 218-218, December.
  4. Smallwood, Dennis E & Conlisk, John, 1979. "Product Quality in Markets Where Consumers are Imperfectly Informed," The Quarterly Journal of Economics, MIT Press, vol. 93(1), pages 1-23, February.
  5. Beales, Howard & Craswell, Richard & Salop, Steven C, 1981. "The Efficient Regulation of Consumer Information," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 491-539, December.
  6. Jones, Philip & Hudson, John, 1996. "Signalling product quality: When is price relevant?," Journal of Economic Behavior & Organization, Elsevier, vol. 30(2), pages 257-266, August.
  7. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-39, March.
  8. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
  9. Schwartz, Alan & Wilde, Louis L, 1985. "Product Quality and Imperfect Information," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 251-62, April.
  10. Marino, Anthony M., 1988. "Products liability and scale effects in a long-run competitive equilibrium," International Review of Law and Economics, Elsevier, vol. 8(1), pages 97-107, June.
  11. Burrows, Paul, 1992. "Consumer safety under products liability and duty to disclose," International Review of Law and Economics, Elsevier, vol. 12(4), pages 457-478, December.
  12. R. Wiegert, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 268-268, December.
  13. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  14. Miceli, Thomas J., 1997. "Economics of the Law: Torts, Contracts, Property, Litigation," OUP Catalogue, Oxford University Press, number 9780195103908, March.
  15. Beales, Howard & Craswell, Richard & Salop, Steven, 1981. "Information Remedies for Consumer Protection," American Economic Review, American Economic Association, vol. 71(2), pages 410-13, May.
  16. R. Dutter, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 238-238, December.
  17. McKean, Roland N, 1970. "Products Liability: Implications of Some Changing Property Rights," The Quarterly Journal of Economics, MIT Press, vol. 84(4), pages 611-26, November.
  18. W. Kip Viscusi, 1991. "Product and Occupational Liability," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 71-91, Summer.
  19. N. Draper, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 106-106, December.
  20. Walter Y. Oi, 1973. "The Economics of Product Safety," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 3-28, Spring.
  21. John Kambhu, 1982. "Optimal Product Quality under Asymmetric Information and Moral Hazard," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 483-492, Autumn.
  22. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
  23. R. Lasser, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 94-94, December.
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