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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. 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.
  2. W. Kip Viscusi, 1991. "Product and Occupational Liability," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 71-91, Summer.
  3. Spence, A Michael, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 561-72, October.
  4. Kyle Bagwell & Michael Riordan, 1988. "High and Declining Prices Signal Product Quality," Discussion Papers 808, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. 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.
  6. 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.
  7. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9483, National Bureau of Economic Research, Inc.
  8. 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.
  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. N. Draper, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 106-106, December.
  11. R. Dutter, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 238-238, December.
  12. 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.
  13. 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.
  14. Miceli, Thomas J., 1997. "Economics of the Law: Torts, Contracts, Property, Litigation," OUP Catalogue, Oxford University Press, number 9780195103908, March.
  15. Walter Y. Oi, 1973. "The Economics of Product Safety," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 3-28, Spring.
  16. 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.
  17. 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.
  18. 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.
  19. R. Lasser, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 94-94, December.
  20. R. Wiegert, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 268-268, December.
  21. 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.
  22. 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.
  23. H. Heyer, 1992. "Book review," Metrika, Springer, vol. 39(1), pages 218-218, December.
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