Products Liability When Consumers Vary in Their Susceptibility to Harm and May Misperceive Risk

Thomas Miceli, Kathleen Segerson () and Suo Wang
Additional contact information
Suo Wang: University of Connecticut

No 2013-15, Working papers from University of Connecticut, Department of Economics

Abstract: This paper examines products liability when consumers have private information about their susceptibilities to product-related harm. In this case, it is efficient for consumers to self-select in their purchases, with those especially prone to harm refraining from purchase. Achieving this outcome requires consumers to bear their own harm, given that producers cannot observe consumer types. When consumers also misperceive risk, the problem becomes more complicated because accurate signaling of risk requires that firms bear liability. A trade-off therefore emerges between imposing liability on firms versus consumers. This paper characterizes the choice among liability rules in the presence of this trade-off.

Keywords: Products liability; negligence; strict liability; consumer misperceptions (search for similar items in EconPapers)
JEL-codes: K13 L15 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2013-07
New Economics Papers: this item is included in nep-cta and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: PRODUCTS LIABILITY WHEN CONSUMERS VARY IN THEIR SUSCEPTIBILITY TO HARM AND MAY MISPERCEIVE RISK (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2013-15

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