Uncertain product risk, information acquisition, and product liability
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Philipps-Universität Marburg
Abstract
We describe how product liability interacts with regulatory product
approval in influencing a firm’s incentives to acquire information about
product risk, using a very parsimonious model. The firm may have in-
sufficient information acquisition incentives when it is not fully liable
for the harm caused by its product. The firm may also have excessive
information acquisition incentives under both full and limited liability.
We highlight efficiency inducing liability rules.
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This item has been published with the following license: In Copyright