 Environmental liability and product customization choices: strict liability vs negligence revisitedAndreea Cosnita-Langlais and Eric Langlais Post-Print from HAL Abstract: This paper studies the role of environmental liability in shaping firms' product differentiation choices, both horizontally (product design) and vertically (safety), and the ensuing welfare implications. We use a spatial Cournot duopoly where firms' activity may entail accidental environmental harm. We show that for low levels of harm, both strict liability and negligence lead to a fully symmetric equilibrium with no differentiation: strict liability provides less output and more safety (thus, lower expected environmental harm) than negligence. Nevertheless, negligence affords higher welfare. For higher environmental harm, only strict liability yields an equilibrium where firms differentiate both horizontally and vertically: each firm becomes dominant (dominated) on a subset of local markets, where it delivers more (less) output and much more (less) safety than in the no-differentiation equilibrium under negligence. In this case, strict liability provides higher welfare. Keywords: spatial Cournot competition; strategic location; horizontal differentiation; vertical differentiation; environmental liability; strict liability; negligence. (search for similar items in EconPapers) Published in International Review of Law and Economics, 2024, 79 (September), pp.Article 106214. ⟨10.1016/j.irle.2024.106214⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04682845 DOI: 10.1016/j.irle.2024.106214 Access Statistics for this paper More papers in Post-Print from HAL |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.