Smart products: Liability, investments in product safety, and the timing of market introduction
Herbert Dawid and
Journal of Economic Dynamics and Control, 2022, vol. 134, issue C
We analyze the role of product liability for the emergence and development of smart products such as autonomous vehicles (AVs). We develop, and calibrate to the U.S. car market, a dynamic model where a (monopolistic) innovator chooses safety stock investments, the timing of market introduction, and the product price. Inducing higher long-term product safety through a strict (partial) liability rule reduces short-term safety investments and slows down AV market penetration. By contrast, negligence-based liability fosters initial investments without hampering long-term product safety. However, too stringent liability might forestall investments in the development of AVs and their market introduction.
Keywords: Product innovation; Product liability; Smart products; Autonomous vehicles; Optimal investment dynamics (search for similar items in EconPapers)
JEL-codes: K13 L11 L62 O31 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:134:y:2022:i:c:s0165188921002232
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