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Product liability influences incentives for horizontal mergers

Author

Listed:
  • Andreea Cosnita-Langlais

    (CNRS, EconomiX, Université Paris Nanterre, 92001 Nanterre)

  • Tim Friehe

    (University of Marburg, Public Economics Group)

  • Eric Langlais

    (CNRS, EconomiX, Université Paris Nanterre, 92001 Nanterre)

Abstract

This paper explores how product liability rules affect merger incentives, with consumer risk perception as a key factor. We find a striking contrast: when consumers overestimate product risk, no liability generates the strongest merger incentives, while strict liability and negligence have weaker, similar effects. Conversely, when consumers underestimate risk, strict liability maximizes merger incentives, and no liability minimizes them. We also demonstrate that horizontal mergers without efficiency effects can unexpectedly increase welfare under no liability or negligence when consumers underestimate risk—a result that is impossible under strict liability.

Suggested Citation

  • Andreea Cosnita-Langlais & Tim Friehe & Eric Langlais, 2025. "Product liability influences incentives for horizontal mergers," Post-Print hal-05271189, HAL.
    • Handle: RePEc:hal:journl:hal-05271189
    DOI: 10.1016/j.irle.2025.106302
    as

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