Punitive Damages and the Optimal Level of Product Failure

Raymond J. Ballard and Dale R. Funderburk
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Raymond J. Ballard: Texas A&M University-Commerce
Dale R. Funderburk: Texas A&M University-Commerce

Journal of Economic Insight, 2002, vol. 28, issue 1, 67-78

Abstract: For several years a battle has been waged between trial lawyers and American business regarding the issue of punitive damage awards. Given the staggering magnitude of the monetary penalties that modern juries often impose against defendant firms, as well as the potential damage to the reputation of the company, how far should a supplier go in terms of efforts to improve product performance and reduce safety risks? We present a simple model that may be used as a framework for determining the optimal level of product safety/failure.

JEL-codes: D21 K13 (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:mve:journl:v:28:y:2002:i:1:p:67-78

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