Products Liability, Consumer Misperceptions, and Market Power

A. Mitchell Polinsky () and William P. Rogerson

Bell Journal of Economics, 1983, vol. 14, issue 2, pages 581-589

Abstract: This article compares alternative liability rules for allocating losses from defective products when consumers underestimate these losses and producers may have some market power. If producers do not have any market power, the rule of strict liability is first-best. If market power is sufficiently large, a negligence rule is preferable. And if market power is even larger, the rule of no liability may be preferred.

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Working Paper: Products Liability, Consumer Misperceptions, and Market Power (1982)
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