A Theory of Voluntary Recalls and Product Liability

Welling, Linda

doi:10.2307/1060337

Cited by 21 publications

(9 citation statements)

References 12 publications

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“…With a different focus, another literature has studied the effects of product liability on a firm’s incentives for ex post actions after sales. Welling (1991) shows that a firm makes product recalls in order to build its reputation in the market, whereas Marino (1997) argues that mandatory recalls motivate firms to increase product safety. Spier (2011) analyzes a firm’s incentives to buy back unsafe products and finds that the firm offers a lower buyback price than socially desired.…”

Section: Introductionmentioning

confidence: 99%

Ex Ante Investment, Ex Post Remedies, and Product Liability*

Chen

Hua

2012

Int Economic Review

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A firm can increase product safety through ex ante investment and can remedy quality problems after sales. An increase in product liability raises returns to ex ante investment through higher consumer demand, but may also negatively affect the investment incentive due to more ex post remedial activities. The trade-off between these "output" and "substitution" effects can result in an inverted U-shaped relationship between product liability and ex ante investment. We find that the firm prefers full liability, but consumer surplus can be higher under partial liability. We further identify conditions under which full liability or partial liability is socially optimal. * Manuscript .2 Furthermore, in relation to product liability, a firm's choices between settlement and litigation and between confidential and open settlement may also affect its ex ante quality choice (Daughety andReinganum, 2005, 2006).

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Section: Introductionmentioning

confidence: 99%

Ex Ante Investment, Ex Post Remedies, and Product Liability*

Chen

Hua

2012

Int Economic Review

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“…Early work modeled MBGs as a bundled, homogenous risk-reducing mechanism that increased demand (Mann & Wissinik, 1988, 1990Welling, 1991;Geistfeld & Key, 1991;Phillips, 1993;Davis, Gerstner & Hagerty, 1995) or as a signal for quality of either the product (Heal, 1977) or the retailer (Moorthy & Srinivasan, 1995). These studies treated MBGs as a single, well-defined product, ignoring variations in consumer product evaluation and uncertainty and market evidence showing that companies offer differentiated MBGs.…”

Section: Introductionmentioning

confidence: 99%

Valuation and management of money-back guarantee options

Heiman

McWilliams

Zhao

et al. 2002

Journal of Retailing

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“…While recently Welling (1991) modeled the optimum quantity of recalls, to date no research has focused on the success of recall campaigns in achieving one of their most immediate goals-the correction of safety-related defects in the current automotive stock. Addressing this question is of interest for several reasons.…”

mentioning

confidence: 99%

When Recalls Matter: Factors Affecting Owner Response to Automotive Recalls

Hoffer

Pruitt

Reilly

1994

Journal of Consumer Affairs

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This paper assesses the impact of recall‐specific variables on owner response rates to automotive safety recall campaigns under the National Traffic and Motor Vehicle Safety Act of 1966. Using a multiple regression framework, the paper finds that owner response rates have been significantly higher for owners of American vehicles as compared to European and Japanese vehicles, for owners of newer model vehicles as compared to older ones, and for owners of vehicles with severe safety‐related defects as compared to vehicles with lesser problems. The paper concludes with the suggestion that, for vehicles with characteristically lower owner response rates, the issuance of multiple recall notices or the coupling of periodic safety inspections with recall compliance may be advisable.

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A Theory of Voluntary Recalls and Product Liability

Cited by 21 publications

References 12 publications

Ex Ante Investment, Ex Post Remedies, and Product Liability*

Ex Ante Investment, Ex Post Remedies, and Product Liability*

Valuation and management of money-back guarantee options

When Recalls Matter: Factors Affecting Owner Response to Automotive Recalls

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