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

Listed author(s):
  • 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
Handle: RePEc:cde:cdewps:110
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  1. Beales, Howard & Craswell, Richard & Salop, Steven, 1981. "Information Remedies for Consumer Protection," American Economic Review, American Economic Association, vol. 71(2), pages 410-413, May.
  2. R. Jaikumar, 1992. "Book Review," Foreign Trade Review, , vol. 27(1), pages 103-105, April.
  3. 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.
  4. N. Draper, 1992. "Book review," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 39(1), pages 106-106, December.
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  9. 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.
  10. Roland N. McKean, 1970. "Products Liability: Implications of Some Changing Property Rights," The Quarterly Journal of Economics, Oxford University Press, vol. 84(4), pages 611-626.
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  15. 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.
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  17. 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.
  18. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-239, March.
  19. 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.
  20. Dennis E. Smallwood & John Conlisk, 1979. "Product Quality in Markets Where Consumers are Imperfectly Informed," The Quarterly Journal of Economics, Oxford University Press, vol. 93(1), pages 1-23.
  21. Alan Schwartz & Louis L. Wilde, 1985. "Product Quality and Imperfect Information," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 251-262.
  22. Miceli, Thomas J., 1997. "Economics of the Law: Torts, Contracts, Property, Litigation," OUP Catalogue, Oxford University Press, number 9780195103908.
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  24. W. Kip Viscusi, 1991. "Product and Occupational Liability," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 71-91, Summer.
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