A Note on the Optimality of Domain-specific Liability

Tim Friehe, Eric Langlais and Schulte Elisabeth ()
Additional contact information
Schulte Elisabeth: Marburg Centre for Institutional Economics (MACIE), University of Marburg, Marburg, Germany

Review of Law & Economics, 2022, vol. 18, issue 2, 283-295

Abstract: This note analyzes the socially optimal allocation of liability when both consumers and the environment incur harm from the activity of a monopolistic firm. We show that the marginal welfare effect from a greater extent of loss shifting depends on the domain of harm (consumer vs. environment) and the relationship between the harm level and the level of output (proportional vs. non-proportional). Starting from the relevant benchmark of full compensation in both domains, reducing the firm’s liability for environmental harm is welfare-improving whereas reducing the firm’s liability for consumer harm is welfare-decreasing when harm increases more than proportionally with the quantity produced.

Keywords: liability; cumulative harm; product liability; environmental harm (search for similar items in EconPapers)
JEL-codes: K13 Q50 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1515/rle-2022-0002 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: A Note on the Optimality of Domain-Specific Liability (2022)
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:bpj:rlecon:v:18:y:2022:i:2:p:283-295:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/rle/html

DOI: 10.1515/rle-2022-0002

Access Statistics for this article

Review of Law & Economics is currently edited by Francesco Parisi

More articles in Review of Law & Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().