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| Title: | | Switching consumers and product liability: on the optimality of incomplete strict liability  |
| Authors: | | Baumann, Florian Friehe, Tim Grechenig, Kristoffel |
| Issue Date: | | 2010 |
| Series/Report no.: | | Preprints of the Max Planck Institute for Research on Collective Goods 2010,03 |
| Abstract: | | This article shows that it may be socially optimal to grant accident victims less than full compensation. In our framework, firms are liable under product liability but also invest in care to prevent consumers switching to competitors. Affecting the partition of consumers by means of care-taking is not desirable from a social standpoint. Consequently, it may be optimal to reduce liability below full compensation in order to adjust firms' care incentives. |
| Subjects: | | Tort law product liability care level asymmetric information switching |
| JEL: | | K13 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Preprints of the Max Planck Institute for Research on Collective Goods
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