Product liability influences incentives for horizontal mergers

Andreea Cosnita-Langlais, Tim Friehe and Eric Langlais
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Tim Friehe: University of Marburg, Public Economics Group
Eric Langlais: CNRS, EconomiX, Université Paris Nanterre, 92001 Nanterre

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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.

Keywords: Cournot Market structure; Product risk misperception; Merger; Liability (search for similar items in EconPapers)
Date: 2025-09-23
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Published in International Review of Law and Economics, 2025, 84 (December), pp.Article 106302. ⟨10.1016/j.irle.2025.106302⟩

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Related works:
Journal Article: Product liability influences incentives for horizontal mergers (2025)
Working Paper: Product Liability Influences Incentives for Horizontal Mergers (2024)
Working Paper: Product Liability Influences Incentives for Horizontal Mergers (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05271189

DOI: 10.1016/j.irle.2025.106302

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