Product liability and reasonable product use

Florian Baumann and Alexander Rasch

No 20-071, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We analyze a monopolist who offers different variants of a possibly dangerous product to heterogeneous customers. Product variants are distinguished by different safety attributes. Customers choose product usage which co- determines expected harm. We find that, even with customers being perfectly informed about product variants' safety, product liability can further welfare by limiting the firm's incentives to distort product safety in pursuance of profit- maximizing price discrimination. In this context, strict liability has to be accompanied by a defense of product misuse, but reasonable use of the base product variant should be defined more leniently than what an application of the Hand rule or instructions in user manuals might prescribe.

Keywords: Comparative negligence; Price discrimination; Product liability; Product use (search for similar items in EconPapers)
JEL-codes: D82 K13 L11 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ind and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/226704/1/1741737656.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:20071

Access Statistics for this paper

More papers in ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().