Characterization of Efficient Product Liability Rules: When Consumers are Imperfectly Informed

Ram Singh ()

No 110, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: Product liability has acquired immense importance in the last 50 years. Various studies show that when consumers are imperfectly informed about the product related risk, the market mechanism will not lead to an efficient outcome and tort liability is required for economic efficiency. Many product-caused injuries are governed by liability rules. In this paper efficiency properties of the entire class of product liability rules when consumers are imperfectly informed about the product related risk are studied in a unified framework. A necessary and sufficient condition for efficiency of a product liability rule is derived. The analysis is carried out in a somewhat more general framework.

Keywords: Product Risk; total accident costs; efficient product liability rules; social benefits; negligent consumer's liability; imperfect information; Nash equilibrium. (search for similar items in EconPapers)
JEL-codes: K13 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2002-12
New Economics Papers: this item is included in nep-law
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