Cumulative Harm and Resilient Liability Rules for Product Markets

I’ve not yet read it, but a recent law and economics paper on product liability looks interesting. The abstract is below. A prior draft is online at this page of SSRN.

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Cumulative Harm and Resilient Liability Rules for Product Markets

Andrew F. Daughety

Vanderbilt University

Jennifer F. Reinganum

Vanderbilt University

Abstract

In the traditional unilateral care model of products liability, expected harm is proportional to usage. Thus, all standard liability regimes yield the efficient choice of care by the firm, independent of the level of usage. This implies that liability for harm can be considered independently of market structure and competition. We find that when expected harm is cumulative (i.e., increasing and convex in usage), then different liability regimes produce different outcomes and yield different implications for social efficiency. Since the responsibilities for product and market performance are divided among relevant agencies and institutions, this presents a challenge to the correct design of rules for agents in the market. We argue for selection among alternative liability regimes based upon what we refer to as “resilience.” Strict liability is a resilient policy; no liability and negligence are not resilient. Thus, we provide a new argument for strict liability with respect to product-generated harms.

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About Kirk

Since becoming a lawyer in 1983, Kirk’s over 30 years of practice have focused on advising a wide range of corporations, associations, and individuals (as both plaintiffs and defendants) on both tort and commercial law issues centered around “mass torts.”

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