Economic Analysis of Products Liability: Theory

Daughety, Andrew F.; Reinganum, Jennifer F.

doi:10.2139/ssrn.1838540

Cited by 19 publications

(24 citation statements)

References 111 publications

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“…For an innocent citizen all charges are eventually dropped (or she is eventually acquitted) at some cost c < f to herself, which may represent the legal fees associated with proving her innocence. Further, we assume that c > 0 either because typically not all legal fees are compensated (as suggested in Daughety and Reinganum ), or because there is some probability that a false arrest will lead to a wrongful conviction.…”

Section: The Modelmentioning

confidence: 99%

Law Enforcement and Wrongful Arrests With Endogenously (In)competent Officers

Mishra

Samuel

2017

Economic Inquiry

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Economic intuition suggests that enforcement errors incentivize crimes, therefore officers must be penalized for committing such errors. Legal scholars argue that if penalties for errors are severe, officers may become timid while policing (thereby encouraging crime). We evaluate these arguments in a model where officers invest in competence. Competence increases the officer's ability to identify criminals. Low sanctions for errors encourages bold policing by officers but may still raise the equilibrium level of crime because it also discourages investments in competence. Granting immunity to only competent officers (“qualified immunity”) reduces both errors and crimes when competence is observable. (JEL K4, K42, L5)

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Section: The Modelmentioning

confidence: 99%

Law Enforcement and Wrongful Arrests With Endogenously (In)competent Officers

Mishra

Samuel

2017

Economic Inquiry

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“…22 For simplicity, I do not consider more sophisticated policies available to producers, including signaling through prices, third-party certification, warranties, recalls, and ex-post warnings. See the thorough survey of Daughety and Reinganum (2013a). I also exclude the possibility that consumers and firms opt out of the liability system once the investment in safety is sunk (a case studied by Wickelgren (2006)).…”

Section: A2 Products Liabilitymentioning

confidence: 99%

Correlated Accidents

Franzoni

2016

Am Law Econ Rev

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This paper investigates cases in which harms are statistically correlated. When parties are risk averse, correlation plays an important role in the choice between liability rules. Specifically, positively correlated harms favor a liability rule that spreads the risk over a multitude of parties, as in the negligence rule. Negatively correlated harms favor a liability rule that pools risks together, as in strict liability. The same applies when parties can purchase costly insurance (first party or third party). This policy recommendation is in line with current products liability law, which places design defects and warning failures under a de facto negligence regime.

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“…As will be discussed below, the modification of the model of harm to be discussed in Section 3 will actually predict that the firm may purposely violate the negligence standard, as it will prefer strict liability. For a recent discussion of these three liability regimes in the modeling context of products liability issues of manufacturing defects, design defects, and warning defects, seeDaughety and Reinganum (2013a).5 In what follows we focus on a complete and perfect information model, so as to direct attention to very basic changes in the analysis…”

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confidence: 99%