Products liability when consumers are salient thinkers

Tim Friehe and Cat Lam Pham

Economics Letters, 2020, vol. 186, issue C

Abstract: This paper analyzes how product liability influences choices by a brand manufacturer who faces competition from a competitive fringe when consumers are salient thinkers. The market outcome critically depends on the losses that are shifted to the firm, that is, the traditional irrelevance of liability assignments no longer holds. Moreover, we show that the brand manufacturer implements suboptimal product safety and explain that the firm, if subjected to the negligence rule, may choose to be negligent.

Keywords: Product liability; Salience; Competition (search for similar items in EconPapers)
JEL-codes: D91 K13 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:186:y:2020:i:c:s0165176519304240

DOI: 10.1016/j.econlet.2019.108844

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