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http://hdl.handle.net/10419/67104
  
Title:Innovation, tort law, and competition PDF Logo
Authors:Baumann, Florian
Heine, Klaus
Issue Date:2012
Series/Report no.:DICE Discussion Paper 78
Abstract:In this paper, we examine the link between innovative activity on the part of firms, the competitive pressure to introduce innovations and optimal damages awards. While innovative activity brings forth valuable new products for consumers, competitive pressure in the ensuing innovation race induces firms to launch innovations too early, thereby raising the likelihood of severe product risks above the optimal failure rate. Introducing innovations too early may call for the application of punitive damages instead of mere compensation of harm caused, in order to decelerate such welfare-reducing innovation races. The optimal tort system is accordingly highly dependent not only on the expected profits and the effectiveness of time delays with respect to reducing expected harm, but also on the competitive environment in which firms operate.
Subjects:competition
innovation
punitive damages
tort law
JEL:K13
L13
O31
ISBN:978-3-86304-077-2
Document Type:Working Paper
Appears in Collections:DICE Discussion Paper, Düsseldorf Institute for Competition Economics (DICE)

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