Manufacturer Liability for Harms Caused by Consumers to Others

Bruce Hay and Kathryn E. Spier

No 10972, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Should the manufacturer of a product be held legally responsible when a consumer, while using the product, harms someone else? We show that if consumers have deep pockets then manufacturer liability is not economically efficient. It is more efficient for the consumers themselves to bear responsibility for the harms that they cause. If homogeneous consumers have limited assets, then the most efficient rule is "residual-manufacturer liability" where the manufacturer pays the shortfall in damages not paid by the consumer. Residual-manufacturer liability distorts the market quantity when consumers' willingness to pay is correlated with their propensity to cause harm. It distorts product safety when consumers differ in their wealth levels. In both cases, consumer-only liability may be more efficient.

JEL-codes: D62 K13 (search for similar items in EconPapers)
Date: 2004-12
New Economics Papers: this item is included in nep-bec and nep-law
Note: LE
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as Hay, Bruce and Katherine Spier. “Manufacturer Liability for Harm Caused by Consumers to Others.” The American Economic Review 94, 5 (2005): 1700-1711.

Downloads: (external link)
http://www.nber.org/papers/w10972.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:10972

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10972

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().