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Firm Liability When Third Parties and Consumers Incur Cumulative Harm

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  • Schulte, Elisabeth
  • Friehe, Tim
  • Langlais, Eric

Abstract

This paper analyzes liability rules when consumers and third parties/the environment incur harm. Expected harm is convex in the level of output and modeled as a power function. We show that the social ranking of liability rules previously established for the case in which only consumers suffer harm (strict liability dominates no liability and negligence) may be reversed if harm to third parties or the environment is sufficiently important.

Suggested Citation

  • Schulte, Elisabeth & Friehe, Tim & Langlais, Eric, 2021. "Firm Liability When Third Parties and Consumers Incur Cumulative Harm," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242339, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc21:242339
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    References listed on IDEAS

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    1. A. Mitchell Polinsky & Steven Shavell (ed.), 2007. "Handbook of Law and Economics," Handbook of Law and Economics, Elsevier, edition 1, volume 2, number 2.
    2. Friehe, Tim & Langlais, Eric, 2017. "Prevention and cleanup of dynamic harm under environmental liability," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 107-120.
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    8. A. Mitchell Polinsky & Steven Shavell (ed.), 2007. "Handbook of Law and Economics," Handbook of Law and Economics, Elsevier, edition 1, volume 1, number 1.
    9. Alfred Endres & Tim Friehe, 2015. "The Compensation Regime in Liability Law: Incentives to Curb Environmental Harm, Ex Ante and Ex Post," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 105-123, September.
    10. Albert H. Choi & Kathryn E. Spier, 2014. "Should Consumers be Permitted to Waive Products Liability? Product Safety, Private Contracts, and Adverse Selection," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(4), pages 734-766.
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    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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